S&P Global Ratings has announced that it is raising the outlook on Iceland from stable to positive. This decision was made after affirming the island’s A/A-1 Sovereign Credit Rating on Friday. S&P believes that Iceland’s strong economic recovery from the pandemic and continued fiscal consolidation over the next few years will greatly enhance its finances above previous expectations.
The outlook for Iceland reflects S&P’s belief that the country’s fiscal outlook will continue to improve, and its ability to withstand external shocks will strengthen. According to the ratings agency, Iceland’s real GDP growth was 3.3% this year, and the public deficit, which averaged over 8% of GDP in 2020-21, is expected to drop to less than 2% of GDP.
Inflation in Iceland has been above 9% since July 2022 and is expected to continue rising in the upcoming months, averaging above 8% in 2023. S&P believes that this rise in inflation will not greatly impact Iceland’s growing economy.
Overall, the positive outlook on Iceland demonstrates S&P’s confidence in the country’s economic resilience and its ability to maintain fiscal stability even in the face of external challenges. With continued fiscal consolidation and a strong economic recovery, Iceland is set to witness a period of financial prosperity in the coming years.