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26 March 2014

Moody’s outlook for Cyprus credit worthiness…positive!

Last Friday, Moody’s ratings agency, has raised its outlook for Cyprus from negative to positive, because of a stronger than expected economic performance in 2013, an issue also raised a while back by Delia Velculescu, the International Monetary Fund official and head of Troika in Cyprus, who said that, even though the Cypriot economy shrank noticeably in 2013, it shrank much less than initially anticipated.

From years of prosperity to austerity, Cyprus faced near bankruptcy ( mostly because of the bad investment choices and the banks’ high exposure to Greek debt ) and Moody’s ratings agency noted a negative outlook for Cyprus and downgraded the island to Caa3 from B3 in January 2013.

The international creditors granted Cyprus with a 10-billion-euro ($13.8-billion) bailout in March 2013, almost half of which has now been paid out. Public’s patience and cooperation, as well as Cyprus authorities’ record of successfully meeting conditions and guidelines set by Troika, seems to be paying off.

Despite the positive outlook and upgrade of credit worthiness from negative to positive, Moody’s still confirms that the island still has a Caa3 rating which “reflects the still-elevated risk of Cyprus defaulting on its debt, or undergoing debt restructuring over the medium term given the highly interrelated economic, banking sector and public finance risks it continues to face.” But the agency gave hope to the island’s economy, by saying it will consider upgrading Cyprus’ rating, if there is further progress under the program to ensure the continuation of the positive momentum and stabilization of the public debt ratio.

 

Newsletter by: ServPro Accountants & Business Consultants. 26 March 2014

 

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