CYPRUS Fitch sovereign review: long term sovereign rating upgraded to two notches below investment grade, outlook still positive
On Friday October 20th, Fitch upgraded the long-term sovereign rating of Cyprus by one notch from BB- to BB with a positive outlook. According to Fitch, the decision reflects primarily the strong improvement in public finances performance and outlook and outperformance of GDP growth forecasts over recent years. Fitch now anticipates GDP growth to average 3.5% in 2017-2018 up from 2.5% a year ago when Cyprus was last upgraded to BB-. On the other hand, Fitch warns that the banking sector’s exceptionally weak asset quality remains a key weakness and a material downside risk to the ongoing recovery. Further on, the agency concludes that future developments on NPEs reduction and private sector indebtness are key factors that may lead to a positive or negative rating action in the future.
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