Moody’s upgrades Iceland’s ratings to A1, changes outlook to stable

ISTANBUL

Moody’s announced Friday it upgraded Iceland’s local and foreign currency long-term issuer ratings to A1, from A2, but changed its outlook to stable from positive.

The upgrade in the rating reflects the government’s improving fiscal metrics with a sizeable reduction in the budget deficit, and a clearly established downward trend in the government debt ratio since it peaked in 2020, Moody’s said in a statement.

While tight monetary and fiscal policy has started to moderate high inflation, lower inflation will improve the government’s debt affordability metrics over the coming years, it added.

The stable outlook, meanwhile, reflects the country’s balanced risks at the A1 rating level, according to the rating agency.

“We expect fiscal consolidation to continue over the coming years broadly as planned in the medium-term fiscal plan,” said the statement.

“The economy is expected to return to robust growth next year, after a temporary slowdown this year as the tight monetary and fiscal policy cool the previously overheated economy,” it added.

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