Snap elections at the end of November 2024 resulted in the center-left Social Democratic Alliance winning the largest number of seats and forming a governing coalition with two other parties. We expect broad policy continuity under the new government, with fiscal consolidation likely to continue. Real GDP expanded by a timid 0.5% in 2024, but growth should rebound to average 2.3% growth per year in 2025-2028. Iceland will have to navigate possible tariffs and other pressures stemming from a more volatile global geopolitical landscape. We forecast Iceland's net general government debt (net of liquid assets) will steadily decrease to 39% of GDP by 2028, in line with the government's commitment to fiscal consolidation. We affirmed our 'A+/A-1' sovereign credit ratings
