Iceland: Staff Report for Second Review Under Stand-By Arrangement and Request for Extension of the Arrangement, Rephasing of Access and Establishment of Performance Criteria.

IMF Staff Country Reports, April 21, 2010

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Canonical URL: Iceland: Staff Report for Second Review Under Stand-By Arrangement and Request for Extension of the Arrangement, Rephasing of Access and Establishment of Performance Criteria.

Publication date: April 21, 2010
This report covers Iceland’s Second Review under the Stand-By Arrangement and Request for Extension of the Arrangement.
Central finding: Supportive fiscal policies have helped consumption hold up better than expected.
External sector developments highlighted: benefits from currency depreciation and higher commodity prices.
Noted: overall improvements in inflation and the trade and current account balances since the late 2008 crisis have been striking.

Fiscal policy: Supportive fiscal policies correlated with stronger-than-expected consumption.
External sector effects:
- Currency depreciation supported external adjustment.
- Higher commodity prices contributed positively to the external sector.
Post-crisis adjustments: Significant improvements in inflation, trade balance, and current account balance since the late 2008 crisis.

Consumer indicators:
- Indicators suggest firming consumer sentiment.
- Inflation expectations are described as stable.
Business indicators:
- Business sentiment remains weak.

Subjects covered: Asset and liability management; Banking; Debt restructuring; External debt; Financial institutions; Loans; National accounts; Private debt; Public debt.
Keywords: CR, crisis, Debt restructuring, deficit, deficit adjustment, Dominique Strauss-Kahn, economy of Iceland, Iceland's economy, Iceland's effort, inflation expectation, ISCR, Loans, Private debt, savings bank.