Fitch said the upgrade was the result of the country’s strong cyclical economic recovery and prudent fiscal policy but pointed out that weakness in the banking sector is still a risk to public finances.

Harris Georgiades, minister, finance, Cyprus, said progress being made by the country is being recognised.

According to Fitch, the government will continue recording fiscal surpluses of 1.1 percent of GDP this year and 2019, after over-achieving is fiscal target in 2017 with an estimated surplus of 1.9 percent of GDP, compared with a BB median fiscal deficit of 3.2 percent.

Moreover, future developments that may, individually or collectively, lead to an upgrade include the reduction in banking sector Non-Performing Loans that materially reduces the sovereign`s contingent liabilities, track record of declining GGGD/GDP ratio and continued deleveraging of the private sector.