NICOSIA, Oct. 21 (Xinhua) -- Fitch Ratings agency has upgraded Cyprus's long term debt in foreign currency from BB- to BB with a positive outlook, citing a strong improvement in the performance and outlook of its public finances, a statement by the rating agency released in Nicosia on Saturday said.
"Current cash reserves exceed the sovereign's total 2018 financing needs," it added.
The upgrade raises the debt capacity of the eastern Mediterranean island to just one notch below investment grade less than five years after it was rescued by a 10-billion-euro economic package by the Eurogroup and the International Monetary Fund.
Reflecting an announcement by the Finance Ministry, Fitch said Cyprus's debt is expected to drop below 100 percent before the end of this year relative to 108 percent in 2016.
The Finance Ministry had said that it received the go-ahead from the IMF to repay a considerable amount of debt two years ahead of maturing due to better than expected performance of the public finances.
"Fitch now forecasts an average 3.5 percent GDP growth in 2017 and 2018, in light of the recovery in the first half of 2017 (3.6 percent) and improving confidence indicators," the rating agency statement said.
The Finance Ministry forecast for growth this year is even more optimistic, raising development at the end of 2017 to 3.7 percent.
Fitch added that the recovery is reflected in the labour market, where unemployment has dropped to 10.6 percent in this year's second quarter from a crisis peak of 16 percent in 2014.
However, Fitch warned that there are possible risks for the economy as banks are still burdened by a high ratio of non-performing loans, which total 22.8 billion euros (26.87 billion U.S. dollars), or just over 44 percent of total loans, a legacy of the 2013 economic crisis and banking system resolution.
The new upgrade was hailed both by Cypriot President Nicos Anastasiades and Finance Minister Harris Georgiades, who said although still below investment grade, that allows cheap borrowing.
