Lánamál ríkisins - Company Announcement

Moody’s upgrades Iceland’s government ratings to A3; outlook stable

Moody’s Investors Service (MIS) has today upgraded Iceland’s government and
issuer ratings to A3 from Baa2. The rating outlook is stable. This rating
action concludes the review for upgrade that commenced on June 10, 2016. 

The two-notch upgrade of Iceland’s government rating reflects the speed and
extent of the country’s recent progress in recovering from its 2008 banking
crisis. Sustained growth and fiscal restraint allowed a very sizeable reduction
in government debt over the past year, which Moody’s expects to continue and to
be sustained with the deployment of the proceeds of the failed banks’ estates
over the coming years. Cautious but steady progress in addressing the problems
in the banking sector and in relaxing capital controls has considerably reduced
the risks to economic and financial stability from the final stages of capital
account liberalization. 

The stable outlook speaks to the balance of risks that Moody’s foresees for the
rating over the next two years. It balances the positive impact of moderate but
sustained growth and continued fiscal consolidation against, for example, the
residual risks from capital account liberalization, the potential economic and
financial pressures associated with substantial capital inflows and tight labor
markets, and finally the evolving political dynamics.

Attachments:

Moodys Iceland press release upgrade 1 Sept 2016.pdf