The Moody's ratings agency has raised its outlook for Cyprus to positive, while confirming the island's Caa3 credit rating.
A man withdraws money at an ATM at a Bank of Cyprus branch in the capital, Nicosia, on July 30, 2013
The agency said on Friday it was raising the outlook to positive from negative because of a stronger than expected fiscal and economic performance in 2013 and because of the authorities' record of meeting conditions set by international creditors.
But the country's middle-range junk bond status was being confirmed because of "the persistent risks that remain to Cyprus's public finances and their sustainability over the medium term as a result of significant uncertainties to the prospects for the macroeconomy and banking sector," Moody's said in a statement.
Moody's downgraded Cyprus to Caa3 from B3 in January 2013. In all, it had downgraded Cyprus's rating nine notches in 10 months.
After years of prosperity, Cyprus was hit by a financial earthquake more than a year ago, finding itself on the verge of bankruptcy because of the high exposure of its banks to Greek debt.
It was granted a 10-billion-euro ($13.8-billion) international bailout in March 2013, almost half of which has now been paid out.