Iceland boasts stable and mature political institutions, which enjoy broad public backing. Per capita income is among the highest of rated sovereigns ($40,250 in 2004), and growth prospects for the flexible economy are sound, at 3.8% per year in 2004-2007. Public finances are healthy and the general government budget is forecast to be in surplus in 2004-2006. Debt levels continue to trend down toward an expected 28.3% of GDP in 2007. External liquidity is very low, and remains constrained by very high levels of external debt, high current account deficits, and capital outflows from the fully funded pension funds. The financial sector remains an important contingent liability to the government, particularly against the background of strongly increasing external leverage. Due
