Iceland 'A+/A-1' Ratings Affirmed Outlook Stable

(MENAFN- GlobeNewsWire - Nasdaq) On Sept. 5, 2025, S&P Global Ratings affirmed its 'A+/A-1' long- and short-term foreign and local currency sovereign credit ratings on Iceland. The outlook is stable.

The ratings on Iceland reflect the country's very high GDP per capita and strong growth track record. Both of which are higher than those of most sovereigns rated by S&P in Western Europe. The ratings also reflect Iceland ́s robust institutional framework and sound economic and fiscal policies. However, the ratings remain constrained by the volatile nature of Iceland's small, open economy, which is vulnerable to global developments outside of its control, such as geopolitical risks, trade and tariff tensions, and fluctuating terms of trade as well as natural events, such as volcanic activity. The small size of Iceland's economy constrains economic and monetary policy effectiveness, due to the influence of external factors largely outside the country's control.

The stable outlook reflects the view that Iceland's growth will rebound over the next few years, and fiscal and external deficits will remain contained. The outlook also reflects S&P ́s assumption that neither volcanic activity nor global trade tensions will have a significant sustained adverse effect on the country's economic, fiscal, and balance-of-payments performance. Iceland's key aluminum exports are mostly sold to European markets, partially mitigating current U.S. tariff-related risks.

The ratings could be raised if Iceland's public finances improved significantly. S&P could also raise the ratings if they took the view that increasing diversification made the economy more resilient to external shocks and current global trade tensions eased.

The ratings could be lowered if Iceland's fiscal or balance-of-payments performance proved materially weaker than S&P ́s current forecasts. This could happen, for example, if persistently disruptive volcanic activity hampered the country's tourism sector and growth performance; or Iceland was more significantly affected by global trade tensions or forced to sharply increase defense-related expenditure.

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