Faroe Islands maintain Aa2 credit rating with stable outlook from Moody’s

The Faroe Islands have maintained their credit rating from Moody’s, which is set at Aa2 with a stable outlook. This position signifies the third highest rating on Moody’s scale, which consists of 21 levels.

The rating reflects a fundamental credit assessment that focuses on the government’s repayment capacity. Moody’s considers it highly likely that Denmark, which holds the highest credit rating at AAA, would provide support to the Faroe Islands during a crisis. However, the rating could deteriorate if the relationship with Denmark weakens.

In its latest rating update, Moody’s notes that the repayment capacity of the government has slightly improved, prompting a one-notch upgrade in its fundamental credit rating. The upgrade stems from the government’s consistent approach to maintaining a balanced budget over many years, resulting in a stable debt level. Furthermore, the government’s liquidity is reported to be very strong.

Moody’s maintains a stable outlook, anticipating continued economic policies that will support economic stability and ongoing strong liquidity in the government. The agency notes that many investors are willing to lend money to the Faroe Islands.

In addition to financial ratings, Moody’s also conducts an ESG (Environmental, Social, Governance) rating. This rating assesses risks related to environmental changes, social issues such as demographic pressures from an aging population, and governance factors, including the integrity and transparency of public authorities. The Faroe Islands received a score of 3 for environmental factors, 2 for social factors, and 1 for governance, resulting in an average score of 2, which denotes a strong rating.