News

Fitch upgrades Iceland to ‘A-' outlook is positive

7/7/17

Fitch Ratings has upgraded Iceland‘s long-term foreign and local-currency Issuer Default Ratings (IDRs) to ‘A-' from ‘BBB+' with positive outlook. The main drivers behind the upgrade are reduced external vulnerability and improvements in government debt ratios, supported by robust growth.

With this upgrade, Iceland's credit rating is A with the three major credit rating agencies. Moody's upgraded Iceland to ‘A3' in September 2016, Standard & Poor's to ‘A-‘ in January 2017 and to A in March.

The rating agency's press release states that factors that could lead, individually or collectively, to an upgrade are:

  • Resilience of the economy to external shocks, in the context of a more open capital account.
  • Continued economic growth without excessive macroeconomic imbalances.
  • Continued falls in the public debt ratio, supported by prudent fiscal policy.

Furthermore, in view of the positive outlook, Fitch does not currently anticipate developments with a high likelihood of leading to a downgrade. However, future developments that may, individually or collectively, lead to a negative rating action include:

  • Evidence of overheating in the domestic economy, for example through wage-price spirals, inflation overshoots, and adverse effects on household and corporate balance sheets.
  • A weakened commitment to fiscal consolidation in the medium term.
  • Excessive capital outflows leading to external imbalances and pressures on the exchange rate.

Fitch'spress release