Iceland's balance of payments performance has exceeded our forecasts. We estimate the current account surplus was more than 5% of GDP in 2016, predominantly supported by robust tourism growth. The Central Bank of Iceland's (CBI) foreign exchange reserves grew by over 40% last year, marking a visible strengthening in the economy's external position. We are therefore raising our long-term ratings on Iceland to 'A-' from 'BBB+'. The stable outlook primarily balances the potential for further improvement in Iceland's external and monetary profiles, as capital controls are fully lifted, against the risk of the domestic economy overheating over the next two years. On Jan. 13, 2017, S&P Global Ratings raised its long-term foreign and local currency sovereign credit ratings on the
