Fitch Ratings has revised the Outlook on Iceland’s Long-Term-Foreign-Currency (LT FC) Issuer Default Rating (IDR) to Positive from Stable and affirmed the IDR at ‘A’.
The Positive Outlook reflects Iceland´s strengthened public finances. General government debt is projected to fall significantly in 2025 after the successful settlement of the Housing Financing Fund´s (HF Fund) liabilities and the full privatisation of Islandsbanki. Progress continues in diversifying the economy into higher-value-added sectors, such as pharmaceuticals, ICT and biotechnology. Iceland’s abundant renewable energy sources and competitive energy prices have attracted investments in energy-intensive data centres. There is also strong potential in aquaculture, where Iceland has a global competitive advantage.
Increased confidence in a material and sustained decline in the government debt/GDP ratio and continued strong growth and evidence of economic diversification that reduces Iceland’s vulnerability to external shocks, could individually or collectively lead to positive rating action.
A marked deterioration in the debt/GDP trajectory, for example, from a sustained period of fiscal loosening or a severe economic shock, for example, from a significant slowdown in the global economy, could individually or collectively lead to negative rating action.
