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S&P Global Ratings affirms Iceland at 'A+/A-1', Outlook Stable

1. S&P Global Ratings affirmed Iceland's 'A+/A-1' credit ratings with a stable outlook. 2. Iceland's high GDP per capita supports its credit ratings despite economic vulnerabilities. 3. Ratings could improve with strengthened public finances and reduced global trade tensions. 4. Possible downgrades could occur due to volcanic activity or global trade disruptions.

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Why Bullish?

The affirmation of Iceland's credit rating suggests stability, which might positively impact SPGI's reputation. Historical instances show that stable ratings can lead to increased investor confidence and related stock performance.

How important is it?

The article directly pertains to S&P Global Ratings, aligning with SPGI's core activities. The stability and potential for improved ratings may influence SPGI’s stock perception in the market.

Why Short Term?

Immediate effects are likely, primarily reflecting market reactions to credit ratings. SPGI's performance could be influenced in the near term, particularly when new data emerges or investors reassess their positions.

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S&P Global Ratings has affirmed 'A+/A-1' long- and short-term foreign and local currency sovereign credit ratings on Iceland. The outlook is stable. S&P´s ratings on Iceland reflect the country's very high GDP per capita and strong growth track record, which has been higher than most sovereigns S&P rates in Western Europe, as well as Iceland’s robust institutional framework and sound economic and fiscal policies. The ratings remain constrained by the volatile nature of Iceland's small, open economy, which, in S&P’s view, is vulnerable to natural events, including volcanic activity, as well as adverse external developments outside of its control, such as geopolitical risks, trade and tariff tensions, and fluctuating terms-of-trade. The small size of Iceland's economy also somewhat limits economic and monetary policy effectiveness, due to the influence of external factors largely outside the country's control. The stable outlook reflects S&P´s view that, beyond the temporary slowdown in 2024, Iceland's growth will rebound over the next few years while fiscal and external deficits will remain contained. The outlook also reflects the assumption that neither volcanic activity nor global trade tensions will have a significant sustained adverse effect on the country's economic, fiscal, and balance-of-payments performance. Iceland's key aluminium exports are mostly sold to European markets, particularly the Netherlands and Germany, mitigating current direct tariff-related risks. The ratings could be raised if Iceland's public finances strengthened significantly more than S&P anticipates. The ratings could also be raised if, in S&P´s view, increasing diversification made the economy more resilient to external shocks while current global trade tensions eased without a sustained negative economic impact. S&P could lower the ratings if Iceland's fiscal or balance-of-payments performance proved materially weaker than in its baseline forecasts. This could happen, for example, if persistently disruptive volcanic activity hampered the country's tourism sector and growth performance; or Iceland was more significantly affected by global trade tensions or forced to sharply increase defence-related expenditure. Further information on www.government.is

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