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S&P affirms ‘stable outlook’ for IoM with ‘AAA’ rating

Standard Poor’s Ratings Services has affirmed an ‘AAA/A-1+’ sovereign credit rating on the Isle of Man and says its outlook is stable.

Standard Poor’s credit analyst Marko Mrsnik says: “The ratings on the Isle of Man reflect the sovereign’s prudent and flexible fiscal and economic policies, which we expect will continue to sustain a general government net asset position.

“The Isle’s government balance sheet remains very strong, and is underpinned by net assets estimated at around 50 per cent of GDP in 2008.”

According to S&P, previously strong general government surpluses will decline over the medium term as a result of lower revenues following the implementation of the zero corporate tax regime and an increase in social benefits. However it notes that the latter will be partly financed by the withdrawal of some tax exemptions and expects lower economic activity to burden public finances.

S&P says the failure of KSF IoM suggests an increase in the government’s contingent liabilities due to funding requirements of the local depositor compensation.

Mrsnik says: “The stable outlook reflects our expectation that, over the medium term, the Isle of Man government’s overall robust financial position and policy flexibility should enable the Isle to weather the ongoing challenges in the global economic environment.

“Significant worsening in the economic performance, pressures on the currently strong net asset position, or a substantial increase in contingent liabilities from the financial sector would lead to downward pressure on the rating.”

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