Moody’s upgrades Cyprus foreign currency ratings

Moody’s Investor Service has revised higher the credit rating of Cyprus on foreign currency from “A2 Positive” to “A1 Positive”.

According to a statement issued by the Ministry of Finance, Moody’s also upgraded credit rating of Cyprus as regards domestic currency to ‘A1 Positive’ from ‘A2 Positive’, which was its previous evaluation.

The Ministry of Finance considers Moody’s revised ratings as a positive development that “would strengthen the government’s credit worthiness and further improve the terms of financing”.

The Moody’s evaluation took into consideration the adoption of the euro on January 1, 2008, the viable growth rate, the constraint of inflation in relatively low levels, the stability of exchange rate and the fact that Cyprus is in the process of fiscal reforming that contributes to the continuous improvement of public finances.

According to the Ministry of Finance, Moody’s considers Cyprus’ accession to the eurozone a positive step which will contribute to the improvement of the economy and further advance of establishments and citizens.

Moody’s also believes that the adoption of the euro will lead to a convergence of Cyprus Pound interest rates to the rates of the euro, create more favourable conditions for financing of both the public and the private sector, eliminate the currency cost and risk of the transactions in euro, help attract foreign investments, secure more transparency as regards pricing and finally pave the way for easier access to foreign markets.

Moody’s refers also to the challenges the local economy must face such as the dependency on oil imports for its energy needs in association to the increasing prices of oil globally, the small size of the economy and the fact that the main contributors to the Gross Domestic Product (GDP) are but a few sectors of financial activity, a fact which contains risks for the economy as a whole in case a certain sector is facing a crisis. This also threatens the competitiveness of Cyprus’ economy.