Stable and mature political institutions. Very high per capita income and strong growth prospects. Healthy public finances and a rapidly declining debt burden. Very high and rapidly rising levels of external debt throughout the economy. Very high external financing needs due to external debt and high current account deficits. Small, relatively undiversified economy. The ratings on the Republic of Iceland are supported by its stable political institutions, a very wealthy and flexible economy, and healthy public finances. The ratings remain constrained by very high levels both of external financing needs and of external debt throughout the economy. The financial sector in Iceland has recovered from the imbalances created by the pre-2001 lending boom. Improved regulation and supervision, as well as
