MOSCOW, November 22 (RIA Novosti) – Fitch Ratings has downgraded Cyprus’s long-term foreign and local currency Issuer Default Ratings (IDRs) to ‘BB-‘ from ‘BB+’, and affirmed the country’s short-term IDR at ‘B’, the international ratings agency reported.
The outlook on the long-term IDRs is negative, Fitch said. The agency also affirmed the Country Ceiling for Cyprus at ‘AAA’.
“The downgrade of Cyprus’s sovereign ratings reflects the materially weaker macroeconomic outlook, a fiscal budget that has significantly underperformed expectations and the continued high level of uncertainty over the costs associated with bank recapitalization,” Fitch said in a statement on Wednesday.
“The delay in negotiating official support has contributed to the deteriorating economic conditions,” Fitch said, adding that the government’s short-term financing flexibility was dependent on bank financing to meet its funding needs.
The agency said that except for tourism, all sectors of the Cypriot economy contracted in the third quarter of 2012, and that the economy was expected to shrink by over 2 percent this year. Fitch forecast that the country will be in recession into 2014.