Cyprus will stick to its current economic policies, says spokesman

20 September 2016 04:37
Cyprus will stick to its current economic policies, says spokesman

Cyprus will stick to its current economic policies until it achieves an investment grade economy, a government spokesman said on Saturday.

Deputy government spokesman Victor Papadopoulos was commenting on a new upgrading of Cyprus' foreign and local currency long-term sovereign credit ratings from BB- to BB with a positive outlook on Friday by Standard & Poor's ratings agency.

"The new upgrade reflects the correct path being followed in matters relating to the economy," said Papadopoulos.

Cyprus has been following a tight spending policy since it was bailed out by the Eurogroup and the International Monetary Fund after a recession which started in the third quarter of 2011 and continued for 14 consecutive quarters.

Cyprus exited in March a three-year economic adjustment program that harsh austerity measures, including salary and pension cuts and additional taxes.

Finance Minister Harris Georgiades has said that the 2017 budget which he will present to parliament soon is balanced and has a satisfactory primary surplus - a surplus before paying out interest on outstanding debts.

Papadopoulos welcomed the Standard & Poor's upgrade, saying it "brings the economy closer to the investment grade."

An investment grade economy is one with no danger to default on its debt.

Cyprus needs at least one more upgrade by Standard & Poor's to reach the lower medium investment grade of BBB- and at least three notches by Moody's (current B1 stable) and also three notches by Fitch (current B+ positive).

New grading for Cyprus is expected in October by Fitch and in November by Moody's.

Standard & Poor's said in a statement that it expects the Cypriot economy to expand by about 2.7 percent this year, an upwards revision of its forecast in March and to expand by 2.5 percent on each of the next three years.

"We could upgrade Cyprus within the next 12 months it its reduction of currently high levels of non-performing loans accelerates," it added.

Cyprus' forecast is of a growth of 2.7 percent for each of the next three years that will be mainly driven by tourism and the sectors of services, construction and private consumption, expected to be strengthened by a slight increase of salaries and pensions and a reduction of taxes.