Standard and Poor's ratings agency has upgraded the island's sovereign credit rating to 'B' from 'B-' with a positive outlook due to better-than-expected economic performance in 2013.
Meanwhile, Fitch Ratings has revised the outlook on Cyprus’s long-term foreign currency Issuer Default Rating (IDR) to stable from negative and affirmed the IDR at ‘B-’.
The agency has also upgraded the long-term local currency IDR to ‘B-’ from ‘CCC’.
"We remain down to earth and we continue the effort with confidence," Finance Minister
The main drivers for the upgrades were the better-than-expected performance and the continuing progress in the implementation of the bailout adjustment programme.
"The upgrade primarily reflects Cyprus’ better-than-expected economic performance, based on its resilient tourism and business services sectors, and the fact that consumer spending in the private sector has not dipped as much as we anticipate," S&P said. "In addition, the government outdistanced its 2013 fiscal targets by a considerable margin, and we anticipate a repeat performance in 2014."
The government also continued to implement the economic adjustment Program as planned, reducing the risks to full and timely payment of its debt service, S&P said.
Fitch said the outcome reflects a large fiscal correction and a less severe-than-expected recession.
Tight expenditure control contributed significantly to the favourable outcome.
Fitch has revised its fiscal deficit projections to 5 per cent of GDP in 2014 and 4.6 per cent in 2015, from 7.5 per cent and 6.9 per cent, previously.
Risks to programme implementation have eased on recent performance, Fitch said, but remain elevated.
The agency said medium-term targets, in particular, were ambitious.
Official projections showed a 3.3 percentage point improvement in general government primary balance in 2016 to a surplus of 1.2 per cent of GDP which could prove difficult to achieve.
A significant portion of the consolidation also remains outside the programme period which ends in the first quarter of 2016, it said.
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