Moody’s upgrades Cyprus

Moody's Investors Service said it upgraded Cyprus' government bond rating by two notches to B1 from B3.

The outlook is stable.

Cyprus's short-term rating was affirmed at Not-Prime (NP).

Concurrently, the agency raised the local-currency and foreign-currency bond ceilings to Baa1 from Baa3. The short-term foreign-currency bond ceiling was raised to Prime-2 (P-2) from P-3. Additionally, the local-currency and foreign-currency deposit ceilings have been raised to Baa1 from B3 to reflect the full removal of capital controls. The short-term foreign-currency deposit ceiling was raised to P-2 from NP.

Moody’s said the first driver of its decision to upgrade Cyprus' rating to B1 is the faster than expected economic recovery, and the expectation that the export sector will continue to demonstrate resilience and will now be augmented by growth in domestic demand. Moreover, the agency believes that structural reforms that improve competitiveness along with prospective structural reforms such as the reform of the public administration, privatization and also the gradual strengthening of the financial sector will improve the sustainability of medium-term growth.

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