Fitch Affirms Iceland at ‘A’; Outlook Stable
Fitch Ratings has affirmed Iceland’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘A’ with a Stable Outlook.
Iceland's 'A' rating is underpinned by its very high income per capita and governance indicators that are more consistent with those of 'AAA' and 'AA' rated sovereigns. Sizeable buffers, including ample foreign reserves and a large fiscal cash buffer, help mitigate Iceland’s external vulnerabilities. Strong fundamentals include sizeable pension fund assets, a sound banking sector, and strong private sector balance sheets.The rating remains constrained by Iceland's small economy with limited export diversification and high public debt.
Increased confidence in a sharp and sustained decline in the government debt/GDP ratio, higher trend growth and/or evidence of economic diversification that reduces Iceland's vulnerability to external shocks, could lead to a positive rating action.
A marked deterioration in the debt/GDP ratio, for example from a sustained period of fiscal loosening, or a severe economic shock, for example, due to a sharp correction in the real estate market, could lead to a negative rating action.