S&P Raises Iceland's Rating Outlook To Stable From Negative

Standard and Poor's Rating Services on Friday upgraded its outlook on the Icelandic economy to Stable from Negative, while affirming the 'BBB-/A-3' ratings, saying that it sees a balanced risk from the continued economic recovery and the uncertainties related to the lifting of capital controls.

S&P noted that Iceland's proposed mortgage debt relief program is unlikely to materially increase general government debt, provided that the program is financed through increased budgetary revenue.

Iceland has a prosperous and flexible economy, and it has institutional capacity to address financial sector problems and build an environment more conducive to job creation and sustainable economic growth, the agency said.

It, however, cautioned that some of the government's proposed revenue measures could face court challenges from creditors of the old, defaulted Icelandic banks.

S&P forecasts that the Icelandic economy will continue growing on average by nearly 2 percent annually in 2014-2017 as the ongoing growth of the export sector offsets subdued investment.

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