- On March 17th, Standard and Poor’s upgraded the sovereign rating of Cyprus by one notch (from BB to BB+) with a stable outlook. The decision confirmed the expectations of 5 out 11 economist’s StockWatch poll. The decision reflects the better than expected growth performance and fiscal progress so far. In all past editions we have extensively discussed the progress of the Cypriot economy in the last three years. Based on our fact findings on the ground and our analysis, we always advocated that Cyprus is a solid turn-around economic story. After a three year recession in 2012-2014 and a cumulative drop of 10.5% of GDP, the economy expanded by +1.7% YoY in 2015, accelerated to +2.8% YoY in 2016 and is expected to further gain momentum to 3% in 2017. From a demand point of view, growth was broadly driven primarily by the ongoing rebound in private consumption, itself being driven by the improvement in Economic Sentiment (ESI stands very close to the levels prior to Lehman Brothers international crisis), a flourishing tourism sector (tourist arrivals were up by 19.8% in FY2016) and the improvement in labor market conditions (down for a third consecutive year in a row from 15.0% in 2015 to 13.3% in 2016)….
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