Iceland

RGE's Q1 2010 Iceland Outlook

Iceland’s economy is mired in a deep recession after having been one of the most dynamic economies in Europe from 2002 to 2007, during which period it posted average annual growth of over 5%. Following the collapse of Iceland’s banking system in autumn 2008, the country turned to an IMF-led coalition for a US$5.1 billion loan package to manage the crisis. A year later, there were signs of economic stabilization, though seasonally adjusted GDP still decreased by 5.7% q/q in Q3 2009. Growth prospects for 2010 have dimmed since late 2009, after Iceland’s president vetoed the so-called Icesave bill, which appears to be an informal condition for Iceland to obtain further IMF funds. The outlook is highly uncertain due to questions over the continuation of the IMF program. Our baseline scenario assumes resolution of the Icesave dispute will drag on, delaying financing from the IMF and other lenders and darkening the growth outlook.

Read the Q1 2010 Iceland Outlook.