Standard & Poor's announced it had bumped up Iceland's credit rating by one notch to BBB+, citing progress over the easing of capital controls imposed during the 2008 banking crisis.

"The upgrade primarily reflects the further progress Iceland has achieved in resolving the issues standing in the way of capital account liberalisation since June 2015," the ratings agency said in a statement.

The 2008 economic crisis caused the sudden collapse of the island nation's financial sector, forcing the country to ban the outflow of capital for fear of draining the economy of all its resources. 

S&P added in a statement that the upgrade "reflects our expectation that general government debt will continue to decline over the next four years, lowering government expenditure on interest payments".

The current rating remains six notches below the highest ever assigned to Iceland by S&P -- the second best "AA+" grade -- between 1996 and 2006.

The outlook for the country is "stable" given the expected slowdown in growth in 2016 due to an expected tightening of monetary policy, said S&P. The economy grew at 4.2 percent in 2015.

Fitch Ratings agency on Friday maintained its rating for Iceland at "BBB+".