In a yet another sign of the robust recovery of the Icelandic economy since the 2008 financial crash, the ratings agency Fitch has upgraded its rating of Iceland's Long-Term sovereign debt to 'A' from 'A-'. The agency views the outlook for Iceland as stable.
Read more: Balance of payments positive for 14 consecutive quarters: Q3 surplus largest on record
Fitch points out that the foreign balance of Iceland has continued to improve since lifting of capital controls between October 2016 and March 2017. Iceland has run a persistent current account surplus for the past 14 quarters. The five-year average current account surplus is 5.4% of GDP. Strong international investor demand for Icelandic krona has resulted in capital inflows which more than offset portfolio rebalancing capital outflows from Iceland. Consequently, the krona has appreciated by 8.1% year over year at end of November.
The large balance of payments surpluses and capital inflows have supported external debt reduction. Fitch notes that the net international investment position was 4.4% of GDP at end of the third quarter of 2017. The general government debt to GDP ratio has also continued to drop, down to 45.0% of GDP by the end of the year, down from a peak of 94.7% in 2011.
Fitch notes that the lack of diversification in Iceland's export base leaves the economy vulnerable to terms-of-trade shocks.
In a yet another sign of the robust recovery of the Icelandic economy since the 2008 financial crash, the ratings agency Fitch has upgraded its rating of Iceland's Long-Term sovereign debt to 'A' from 'A-'. The agency views the outlook for Iceland as stable.
Read more: Balance of payments positive for 14 consecutive quarters: Q3 surplus largest on record
Fitch points out that the foreign balance of Iceland has continued to improve since lifting of capital controls between October 2016 and March 2017. Iceland has run a persistent current account surplus for the past 14 quarters. The five-year average current account surplus is 5.4% of GDP. Strong international investor demand for Icelandic krona has resulted in capital inflows which more than offset portfolio rebalancing capital outflows from Iceland. Consequently, the krona has appreciated by 8.1% year over year at end of November.
The large balance of payments surpluses and capital inflows have supported external debt reduction. Fitch notes that the net international investment position was 4.4% of GDP at end of the third quarter of 2017. The general government debt to GDP ratio has also continued to drop, down to 45.0% of GDP by the end of the year, down from a peak of 94.7% in 2011.
Fitch notes that the lack of diversification in Iceland's export base leaves the economy vulnerable to terms-of-trade shocks.
