DBRS confirms Cyprus ratings at BBB, changes trend to positive

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NICOSIA, Nov. 16 (Xinhua) -- DBRS Ratings agency (DBRS Morningstar) confirmed Cyprus's Long-Term Foreign and Local Currency -Issuer Ratings at BBB (low) and changed the trend to Positive from Stable, a report made available on Saturday said.

DBRS also confirmed Cyprus's Short-Term Foreign and Local Currency-Issuer Ratings at R-2 (middle) and changed the trend to Positive from Stable.

The report said that the Positive trend reflects DBRS Morningstar's view that the outlook for the downward trajectory in the public debt ratio has improved, driven by sustained robust economic growth, large primary surpluses and early debt repayments.

It added that while moderating, economic growth in Cyprus is projected at around 3 percent in 2019 and 2020, among the strongest in the Euro area.

"Cyprus's fiscal position has also continued to improve, with the fiscal surplus reaching sizable levels, and the government is planning to repay the IMF loan in advance next year," it said.

Cyprus has also paid early the remaining part of a 2.4 billion euros Russian loan obtained before the 2013 crisis, at a 4.5 percent rate, which was later lowered to 2.5 percent.

The debt ratio is projected at 95.6 percent of GDP in 2019, and well below 90 percent in 2021.

The agency pointed out that the materialization of fiscal risks could delay the reduction in public debt, but added that strong growth, together with large fiscal surpluses and early debt repayments, is still expected to contribute to the decline in the government debt-to-GDP ratio over the coming years.

Reasoning its BBB (low) ratings, DBRS said it is supported by Cyprus's solid budget position, its prudent public debt management framework, and its openness to investment encouraging a favorable business environment.

Nevertheless, it pointed out that Cyprus still faces significant credit challenges mostly related to sizable non-performing exposures in the banking and the small size of its service-driven economy.

"The ratings could be upgraded if healthy economic growth is sustained and the fiscal position remains sound, contributing to the downward trajectory in the public debt ratio," the statement said. Enditem

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