Today, Fitch Ratings affirmed Iceland’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at A with a stable outlook. According to the rating agency, this rating balances the economy’s very high income per capita, strong governance, human development and doing business metrics against a high dependence on commodity exports, vulnerability to external shocks and experience of macroeconomic and financial volatility.
The stable outlook reflects balanced risks to the rating. Sustained improvement in the external balance sheet and resilience to external shocks might lead to a positive rating action. Conversely, evidence of overheating in the domestic economy, i.a. through wage-price spirals, inflation overshoots and adverse effects on fiscal, household and corporate balance sheets or excessive capital outflows leading to external imbalances and pressures on the exchange rate might lead to negative rating action.