Fitch Upgrades Iceland to ‘A+’; Outlook Stable; Withdraws Ratings

Core Viewpoint - Fitch Ratings has upgraded Iceland's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'A+' from 'A', with a Stable Outlook, reflecting improved public finances and a commitment to fiscal prudence [1] Group 1: Fiscal Metrics and Debt Management - Improving fiscal metrics and fiscal space are key drivers for the rating upgrade, with a material narrowing of Iceland's general government deficit expected to continue through 2026-2027 [2] - The general government debt ratio is projected to decline gradually in 2026-2027, following significant debt reduction from the settlement of the Housing Financing Fund liabilities and the full privatization of Íslandsbanki [3] Group 2: Economic Strengths and Governance - Iceland's ratings are supported by a wealthy economy, high governance standards, strong institutions, and robust private-sector balance sheets, although the economy's small size poses vulnerabilities [4] - The sound banking sector and high World Bank Governance Indicators ranking reflect stable political transitions, strong institutional capacity, effective rule of law, and low corruption levels [5]