Standard & Poors raises Cyprus credit rating a notch to BB+

International agency Standard & Poors has raised Cyprus' credit grade a notch to BB on the expectation that the eastern Mediterranean island's economy will grow steadily over the next three years.

S&P says that Cyprus' budget will show a small surplus over 2018-2020, pushing the country's large debt burden downward.

Friday's upgrade puts Cyprus a notch below investment grade. But S&P said banks on the island still face a huge volume of bad loans and a 2018 presidential election may hold up privatizations.

Cyprus has been battling back after nearly going bankrupt in 2013 when a banking crisis coupled with overspending forced it to seek a multibillion-euro rescue deal from its eurozone partners and the International Monetary Fund.