Fitch upgrades Iceland to ‘A-' outlook is positive
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.