Ratings agency Moody’s has increased Cyprus’s credit rating by two points, from B3 to B1. The two-notch upgrade was unexpected, as Cyprus had previously been assigned a ‘stable’ outlook.
Moody’s expects fiscal discipline to continue post-program exit and through parliamentary elections next year. The agency anticipates that the government debt burden will now reach below 100 percent by next year and around 80 percent of GDP by 2020. Moody’s said Cyprus is experiencing a “faster than expected economic recovery” and has consistently outperformed compared with fiscal targets.
The agency in particular pointed to recent efforts to streamline public sector administration and also noted improved safeguards for the financial sector, including in the area of insolvency and foreclosure. Moody’s said that non-performing loans are expected to fall as a result of these latter efforts, from 47 percent of loans currently.