Fitch Revises Iceland's Outlook to Positive - The Reykjavik Grapevine

Fitch Revises Iceland’s Outlook to Positive

Published January 31, 2015

Nanna Árnadóttir
Photos by
Natsha Nandabhiwat

Fitch Ratings has revised Iceland’s outlook to Positive from Stable and affirmed the IDRs at ‘BBB’ and ‘BBB+’, respectively, reports Reuters.

Fitch estimates that domestic demand – especially private consumption and investment – will remain the driver of economic growth in Iceland over the next two years but adds that public financing – the collection and allocation of resources by the government – remains a ratings weakness.

The decision to revise Iceland’s Outlook is a result of a few key rating drivers, i.e the extension of bond maturities on the loan between Landsbankinn hf. and LBI hf. (which is managing the winding-up process of Landsbanki Islands hf. following its collapse in 2008).

The extension is also expected to cut Iceland’s private foreign-debt service burden over the next three years, reducing the risk of balance of payment pressures, and improving external financing sustainability.

A statement from Fitch indicates that the steps Iceland has begun taking to remove capital controls is also a driving factor in the outlook revision though capital controls remain in place and weigh on Iceland’s credit profile.

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