Moody’s upgrades Iceland

Moody's Investors Service said it upgraded the Government of Iceland's government debt ratings to Baa2 from Baa3.

The outlook is stable.

Moody’s said the upgrade reflects:

• The initiation of a careful process of capital account liberalization that is expected to reduce the country's external vulnerabilities, while protecting economic and financial stability;

• Expectation of further improvement in the government's gross and net debt position over the next three to four years, thanks to robust growth, further fiscal consolidation and debt pre-payments; and

• Improvements to macro-prudential and micro-prudential regulation designed to preserve the stability of Iceland's financial system in the future.

In a related decision, the agency raised Iceland's country ceilings for long- and short-term foreign currency debt and deposits to Baa2/P-2 from Baa3/P-3 and its country ceilings for local currency debt and deposits to Baa1 from Baa2.

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