Accelerating economic growth and prospects for a continued budget surplus prompted a key credit rating agency on Friday to upgrade the outlook for Cyprus to positive. Standard and Poor's said the improved outlook indicates it could raise the grade on the country's debt in the next 12 months if the positive developments "continue unabated."
S&P currently rates Cyprus's foreign debt BB+. The agency increased the forecast for economic growth to an average of three percent a year through 2020, up from 2.5 percent previously, and said it expects the budget "to remain in surplus over the forecast horizon." Those improvements will help banks deal with bad loans, S&P said in a statement.
Eurozone member Cyprus plunged into a financial crisis in 2013, leaving a number of its top banks insolvent and forcing it to negotiate a painful bailout with international creditors. It has since recovered, after the government imposed harsh austerity measures in exchange for a loan of 10 billion euros (then $13 billion) from the IMF and European Union.