The ratings on the Republic of Iceland are supported by its stable and flexible political institutions. They are key building blocks in the economy's high level of prosperity, which is among the highest of rated sovereigns, with a GDP per capita forecast to reach $57,740 in 2007. At the same time, economic growth has remained high, averaging 6.4% over the period 2004-2006 during the recent investment, credit, and real-estate booms, but is set to slow considerably as the economy cools off, and to recover again to 3.0% by 2011. Nevertheless, considerable downside risks to this scenario remain and could emanate from nominal adjustments in the exchange rate, the property market, or the credit market. Public finances improved considerably during the
