Fitch affirms Sweden at 'AAA'; outlook stable
17 July 2013
Fitch Ratings has affirmed Sweden's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'AAA'. The Outlook on both ratings is Stable. Fitch has also affirmed Sweden's Short-term rating at 'F1+' and Country Ceiling at 'AAA'.
Sweden's 'AAA' foreign-currency IDR reflects the following key rating drivers:
-
Sweden is an advanced, well diversified and wealthy economy. There is a track record of sound macroeconomic and fiscal management, reflected by a strong recovery from recession, low inflation and solid public finances.
-
Governance and institutions are strong. Sweden's institutional strengths give confidence in the country's ability and willingness to honour its public debt commitments.
-
Public finances are a rating strength. Low deficits and debt have allowed Sweden to engage in expansionary fiscal policy, with temporarily increased fiscal deficits of 1.4 per cent and 0.9 per cent of GDP in 2013 and 2014 respectively. Existence of fiscal space allows for this counter-cyclical fiscal policy and supports the rating.
-
High levels of household indebtedness and a sizeable stock of non-amortising mortgages are potential risks in the event of a weaker macro back drop. Large household assets provide mitigation.
-
By international standards, Swedish banks' level of profitability and capitalisation are solid. Core Tier 1 ratios exceed Basel III minimum requirements and Fitch expects Swedish banks will meet the higher minima being introduced by Swedish regulators. However, a large dependence on wholesale funding does leave the banking sector sensitive to funding shocks. The higher level of foreign reserves accumulated by the Riksbank provides some mitigation.
Full press release
© Fitch, Inc.
