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Standard & Poor’s raises Cyprus’s economy rating

Standard & Poor’s raised Cyprus’s sovereign rating a notch to BB- citing the removal of capital controls in April and the improvement in the fiscal situation and placed the outlook to positive.

The rating company may further raise the government’s sovereign rating in the next 12 months provided the Cypriot financial system stabilises further by improving the quality of its assets and economic growth is consolidated and affirmed the government’s B rating for its short term foreign and local currency ratings, S&P was said in a statement on its website today.

“The upgrade reflects our view of the benefits to economic and financial stability from the removal of capital controls in April 2015, in line with our last outlook statement alongside stronger-than-expected outcomes and outlook for fiscal consolidation and economic growth,” S&P said. Following the removal of capital controls originally introduced in March 2013, the liquidity position of the banking sector has remained stable without disruption in deposit flows. We believe that the lifting of capital controls, among other things, partly reflects confidence related to the country’s sustained better-than-expected economic performance. We estimate that the economy, which recently exited a recession, will grow by about 1.5% in 2015 in real terms (much more than our estimate of 0.3% in March 2015) and about 2% per year thereafter”.

Sk Webline Ltd