Fitch indicates possible upgrading of Cyprus' ratings: analyst

Source: Xinhua| 2019-02-10 04:13:09|Editor: Chengcheng
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NICOSIA, Feb. 9 (Xinhua) -- Fitch international ratings agency gave an early indication of a possible upgrade of Cyprus in October, an analyst said when commenting a report on Cypriot economy made available on Saturday.

"I consider that what Fitch is saying is that its next rating report on Cyprus expected in October, 2019, will raise Cyprus's ratings status to full investment grade," economist Marios Mavrides told Xinhua.

He added that this would make financing of the state much cheaper.

The report said that data released by Central Bank of Cyprus (CBC) showed a decline in Cypriot banks' non-performing loans, a development that "significantly reduces" liabilities of the state.

CBC said in its latest report that non-performing exposures at the end of the third quarter of 2018 fell to 11 billion euros (12.5 billion U.S. dollars), or 32 percent of total gross facilities.

This compares with 16.6 billion euros, or 40 percent of the total, in the first quarter of last year.

Non-performing loans totaled about 27 billion euros at the peak of the 2013 economic crisis, representing about 52 percent of total loans. The crisis left tens of thousands of loan owners without the means of repaying their debts.

Fitch said the decline of non-performing facilities was consistent with its expectation voiced in its previous ratings report on Cyprus in October, 2018, when the eastern Mediterranean island was upgraded to "BBB-/Stable".

Another notch in Fitch ratings will bring Cyprus to full investment grade, making the financing of the state much cheaper.

The Fitch report said, however, that Cypriot banks are still weak as a result of the burden on red loans and warned them against failing to take advantage of legislation making it easier to further reduce them.

It said that given the supportive economic environment and the brisk economic growth estimated close to 4 per cent in 2018, banks should take advantage of legal means at their disposal to further reduce their red loans burden.

Fitch added that "prudent fiscal policy" has led to the setting up of a plan to subsidize loans owned by low-middle income sections of the population.

The "Estia" (home) plan, expected to come into effect at the latest in March, was designed to help about 15,000 borrowers to repay their loans by subsidizing their installments by one-third with state funds.

Eligible loan-owners will also be given the benefit of a reduction of their loan down to the value of the houses securing the loans, provided the value of each property does not exceed 350,000 euros.

The "Estia" plan, if fully successful, will help banks reduce red loans by 3.5 billion euros.

"A dynamic labor market, a pick-up in residential property prices, wage increases, and the ESTIA scheme may foster repayments," Fitch said.