Today Fitch Ratings has published a new commentary on Iceland´s sovereign ratings. Iceland´s credit ratings are unchanged; Long-Term (LT) foreign- and local ratings are affirmed at A and Short-Term (ST) foreign- and local currency ratings are affirmed at F1+. The outlook is stable.
As stated in Fitch´s press release, the A rating is driven by the very high income per capita and healthy public finances. The rating is weighed down by small size of the economy and limited export diversification.
The main factors that could lead to a positive rating action are a marked improvement in general government’s balance sheet, supported by prudent fiscal policy, and a sustained improvement in the external balance sheet and increased resilience of the economy to external shocks.
The main factors that could lead to a negative rating action are a sustained and sharper than expected economic downturn, impacting on the banking sector and excessive capital outflows, jeopardising financial stability and weakening external buffers.