Stable and mature political institutions Very high per capita income and strong long-term growth prospect Healthy public finances and a rapidly declining public debt burden Inadequate fiscal and monetary policy mix in management of macroeconomic imbalances Significant contingent fiscal risks from high level of external debt and weak external liquidity Small, relatively undiversified economy The ratings on Iceland are supported by its stable and flexible political institutions, high level of prosperity, and strong long-term economic growth prospects. In the near term, however, the Icelandic economy faces a period of stagnation and the potential risk of a hard landing, as the macroeconomic imbalances built up in the credit and investment boom in the past two years unwind. Fiscal surpluses could not
