Cyprus looks to shed junk rating with economic rebound

Bloomberg

Cyprus wants investors to see it as a comeback kid. With an accelerating economy, the island nation that was forced to seek a bailout and impose a levy on bank deposits in 2013 is betting on an end to its junk rating. That should make it an attractive place for investors, the country’s leaders are saying.
“What has been achieved is nothing short of a remarkable recovery – a rebound which came much sooner than anyone was expecting, “ Finance Minister Harris Georgiades told investors in New York on March 22.
Getting an investment-grade rating for the country’s debt is key to Cyprus’s ability to qualify for the European Central Bank’s asset purchases and to pave the way for sustainable market access. S&P Global Ratings on March 17 raised its long-term credit rating for Cyprus to BB+ from BB, one notch below the rating agency’s investment grade, citing stronger-than-expected economic growth and fiscal progress. Cyprus is also still rated below investment grade by Moody’s and Fitch.
Cyprus’s economy grew 1.7 percent in 2015, returning to growth after three years of recession, and expanded 2.8 percent in 2016, according to initial estimates by the Statistical Service of Cyprus.
The healthy pace of growth is expected to continue in the medium term, supported by tourism, investments and private consumption while potential positive catalysts for the economy are related to possible reunification and exploration for new natural gas deposits in offshore areas, according to Axia Research analysts Constantinos Zouzoulas and Damiani Papatheodotou.

PROOF OF CONFIDENCE
“The fact that secondary market yields of Cyprus’s 10-year government bond are trending downwards, and are now close to 3 percent is the ultimate proof of confidence for the Cyprus economy,” Irena Georgiadou, Chairwoman of Hellenic Bank Pcl, said in an interview. “At the same time, in the low-return global environment, Cyprus sovereign bonds represent a great opportunity for investors.” Cyprus exited its 10 billion-euro ($10.7 billion) bailout program ahead of schedule in March last year, after using just 7.3 billion euros of its loan, before selling 1 billion euros of its seven-year bonds in July in the country’s first venture into the international debt market without a bailout safety net.
“Cyprus is a solid turn-around economic story,” Ioannis Gkionis and Galatia Phoka, research economists at Eurobank in Athens said in a March 21 note. Cyprus is currently the only economy in the euro-area periphery with a positive outlook by both Moody’s and Fitch which implies a possible rating upgrade, provided that the government stays focused on structural reforms, they said.