Support for the coalition government has declined significantly since it was elected, its cohesiveness will continue to be tested in a tricky period for future of the economic recovery.
The overall macroeconomic backdrop is increasingly healthy, though this is partly due to the artificial support of capital controls.
Though the government remains cautious the complex process of removing capital controls still poses potentially massive risks to economic stability.
Major Forecast Changes
We have not made any significant adjustments to our forecasts. We continue to expect inflation to average 2.5% in 2015 as the effects of negotiated wage increases continue to feed into prices.
We maintain our real GDP growth forecast for 2015 at 3.5%. We have slightly increased our forecast for 2016 from 3.0% to 3.1%.
Key Risks To Outlook
The biggest risk to our forecast is policy trajectory, particularly in terms of how the current government chooses to remove distortive capital controls. Mishandling of the capital account liberalisation process has the potential to trigger a sell-off in the krona, Similarly, taking a hard stance with regards to capital withdrawals by foreign creditors could damage long-term investor sentiment towards Iceland.
|Real GDP growth, % y-o-y||3.6||1.9||3.5||3.1|
|Nominal GDP, USDbn||14.6||16.1||14.2||16.2|
|Consumer price inflation, % y-o-y, eop||3.7||-0.4||1.5||3.0|
|Exchange rate ISK/USD, eop||115.18||127.55||148.00||140.00|
|Budget balance, % of GDP||-1.8||-0.2||0.0||0.1|
|Current account balance, % of GDP||6.1||4.4||3.4||1.8|
The Iceland Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Iceland. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Iceland's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Iceland's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Iceland's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Iceland, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Iceland through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Iceland Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Iceland and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Iceland, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Iceland over the next 5-years?
BMI's Iceland country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Iceland Market - Political Strengths, Weaknesses, Opportunities and Threats facing Iceland.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Iceland's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Iceland’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Iceland's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.