Moody’s upgraded the long-term issuer rating of Cyprus as well as all senior unsecured bond and programme ratings to Ba3 and Ba3 from B1 and B1, respectively. The rating agency maintains the positive outlook for Cyprus driven by sustained improvements in the economic resilience and fiscal reforms undertaken. Moody’s points out that although the challenges for the Cyprus economy remain one has to acknowledge and reward the reforms that managed to improve substantially the country’s growth rates and reduce unemployment during the last two years. Special reference was also given by the rating agency to the tourism industry of Cyprus that contributes close to 13.2% of the country’s GDP. Moody’s praised the strong tourism activity and record high arrival numbers being one of the main growth drivers of the island.
Moody’s, however, maintains and highlights the country’s very high level of public and private debt, as well as the fragile state of the banking system that constrain the sovereign rating at the lower end of the Ba range. Nonetheless, the rating agency recognizes and supports the country’s commitment towards fiscal reform in recent years, the growing health of the economy, and the measures being taken to encourage the largest banks to restructure and resolve non-performing loans that can lead to a future upgrade by the agency. The next 12 to 18 months will offer a clearer picture into whether this will occur.