Iceland Outlook Revised To Positive On Strengthening Fiscal Position; 'A+/A-1' Ratings Affirmed

Core Viewpoint - S&P Global Ratings has revised Iceland's long-term ratings outlook to positive, indicating potential improvements in budgetary performance and a decline in government debt [1][2]. Group 1: Fiscal Performance and Projections - Iceland's budgetary performance is expected to strengthen over the next two years, with net general government debt projected to decline to 35% of GDP by 2029 from an estimated 41% in 2025 [2]. - The general government deficit is projected to reduce to 0.2% of GDP by 2027, down from an estimated 1% of GDP last year, with a balanced budget anticipated from 2028 [3]. - Stronger budgetary performance could arise from buoyant economic growth, effective spending controls, or privatization of public assets leading to fiscal dividends [3][4]. Group 2: Potential Rating Changes - S&P may raise Iceland's ratings if fiscal performance exceeds current forecasts, driven by faster growth, effective spending containment, or additional asset privatizations [4]. - The diversification of Iceland's economy into sectors like data centers, biotech, and pharmaceuticals could enhance long-term resilience [4]. Group 3: Risks to Outlook - The outlook could revert to stable if Iceland's growth underperforms expectations due to factors like volcanic activity, rising fuel prices, or global trade tensions [5]. - Weaker budgetary outcomes or increased defense spending without offsetting measures could also lead to a stable outlook revision [5].