June 22, 2017
Tourism continues to drive real GDP growth, which reached 7.2 percent in 2016 and is projected at almost 6 percent this year before tapering to around 2½ percent over the medium term.
", "publishDate": "2017-06-22", "sections": [ { "heading": "Growth and macroeconomic outlook", "content": "- Real GDP growth reached 7.2 percent in 2016 and is projected at almost 6 percent in 2017 before tapering to around 2½ percent over the medium term.\n- Tourism is the primary driver of growth; expansion has been driven by exports, private consumption, and investment rather than leverage.\n- Bank credit to the nonfinancial private sector grew by only 4.3 percent in 2016 but is expected to gain pace going forward.\n- Iceland’s current account surplus is projected to shrink modestly over time, with some export sectors suffering while others thrive.\n- Output gap: 0.5 percent of potential output in 2013 (table entry)." }, { "heading": "Inflation, exchange rate, and monetary policy", "content": "- Inflation was 1.7 percent in May (2017).\n- Continued strong appreciation of the króna reflects market response to increased external demand for tourism and should help guide output to its sustainable long‑run growth path.\n- Directors commended the Central Bank of Iceland for a prudent monetary policy stance and the inflation targeting framework.\n- Recommendations for the Central Bank:\n - Clearly communicate foreign exchange interventions policy.\n - Introduce a fine‑tuning instrument to help sterilize the domestic liquidity impact of interventions.\n - If tourism pickup is sustained, allow real exchange rate appreciation while monitoring competitiveness.\n - If appreciation pushes inflation prospects lower, consider further interest rate cuts." }, { "heading": "Financial sector oversight and capital flows", "content": "- Executive Directors stressed that strengthening financial sector oversight is a key priority.\n- Recommended actions:\n - Review the Act on Official Supervision of Financial Activities to strengthen regulatory and supervisory arrangements, reduce gaps in oversight, and address coordination issues.\n - Maintain strong microprudential regulation and supervision of banks, supported by well‑targeted macroprudential measures.\n - Stringent vetting of investors seeking significant ownership positions in banks given ongoing market interest.\n- Capital flows:\n - Directors emphasized careful management of capital inflows.\n - Most Directors were sympathetic to the current use of a special reserve requirement on selected debt inflows.\n - CFMs should not substitute for warranted macroeconomic adjustment; when used, CFMs should be temporary and transparent in line with the IMF’s Institutional View on the Liberalization and Management of Capital Flows." }, { "heading": "Fiscal policy and public finances", "content": "- Directors recommended strict expenditure control to deliver a tighter‑than‑budgeted fiscal stance in 2017.\n- Fiscal policy should be ready to tighten further if overheating risks materialize.\n- Over the medium term, should fiscal space emerge under the Organic Budget Law, it could be used to support additional spending on infrastructure, healthcare, and education, guided by a comprehensive review of expenditures.\n- Directors welcomed the recent public sector pension reform." }, { "heading": "Structural reforms and tourism management", "content": "- Directors underscored the need for structural reforms to protect competitiveness and foster sustainable tourism.\n- Recommendations:\n - Revamp the wage bargaining framework (authorities’ efforts supported).\n - Formulate a strategy to ensure adequate resources and coordination to develop the tourism sector in a sustainable manner." }, { "heading": "Key statistics (selected figures from 2013–17 table)", "content": "- Gross domestic product (annual percent change): 2013: 4.4; 2014: 1.9; 2015: 4.1; 2016: 7.2; 2017 Proj: 5.8.\n- Total domestic demand (annual percent change): 2013: 0.7; 2014: 5.2; 2015: 5.9; 2016: 8.7; 2017 Proj: 6.4.\n- Private consumption (annual percent change): 2013: 1.0; 2014: 2.9; 2015: 4.3; 2016: 6.9; 2017 Proj: (blank for 2017 in table).\n- Gross fixed investment (annual percent change): 2013: 2.2; 2014: 16.0; 2015: 17.8; 2016: 22.7; 2017 Proj: 9.9.\n- Exports of goods and services (annual percent change): 2013: 6.7; 2014: 3.2; 2015: 9.2; 2016: 11.1; 2017 Proj: (blank in table).\n- Imports of goods and services (annual percent change): 2013: 0.1; 2014: 9.8; 2015: 13.5; 2016: 14.7; 2017 Proj: 8.6.\n- Gross domestic product (ISK bn.): 2013: 1,891; 2014: 2,006; 2015: 2,214; 2016: 2,422; 2017 Proj: 2,632.\n- GDP per capita ($ thousands): 2013: 47.5; 2014: 52.2; 2015: 50.5; 2016: 59.6; 2017 Proj: 67.6.\n- Private consumption (percent of GDP): 2013: 52.3; 2014: 49.8; 2015: 49.0; 2016: 49.1; 2017 Proj: (blank).\n- Gross fixed investment (percent of GDP): 2013: 15.7; 2014: 17.2; 2015: 18.9; 2016: 21.2; 2017 Proj: 21.9.\n- Gross national saving (percent of GDP): 2013: 21.5; 2014: 21.3; 2015: 24.6; 2016: 29.3; 2017 Proj: 28.5.\n- Unemployment rate (percent of labor force): 2013: 5.4; 2014: 5.0; 2015: 4.0; 2016: 3.0; 2017 Proj: (blank).\n- Employment (annual percent change): 2013: 3.3; 2014: 1.6; 2015: 3.4; 2016: 3.7; 2017 Proj: (blank).\n- Labor productivity (annual percent change): 2013: 0.6; 2014: 0.8; 2015: 3.5; 2016: 2.5; 2017 Proj: (blank).\n- Real wages (annual percent change): 2013: 0.9; 2014: (blank); 2015: 6.2; 2016: 8.1; 2017 Proj: (blank).\n- Nominal wages (annual percent change): 2013: 4.8; 2014: (blank); 2015: 7.9; 2016: 10.1; 2017 Proj: (blank).\n- Consumer price index (average): 2013: 3.9; 2014: 2.0; 2015: (blank); 2016: (blank); 2017 Proj: (blank).\n- Consumer price index (end period): 2013: 4.2; 2014: 2.4; 2015: (blank); 2016: (blank); 2017 Proj: (blank).\n- ISK/€ (average): 2013: 162; 2014: 155; 2015: 146; 2016: 134; 2017 Proj: 118.\n- ISK/$ (average): 2013: 122; 2014: 117; 2015: 132; 2016: 121; 2017 Proj: 109.\n- Central bank 7 day term deposit rate (for 2017, rate as of June 7): 2013: 5.75; 2014: 4.50; 2015: 5.00; 2016: 4.75; 2017 Proj: (blank).\n- General Government Finances (percent of GDP) — Revenue: 2013: 42.1; 2014: 45.2; 2015: 42.0; 2016: 58.4; 2017 Proj: 41.6.\n- General Government Finances (percent of GDP) — Expenditure: 2013: 43.9; 2014: 45.3; 2015: 42.9; 2016: 46.1; 2017 Proj: 40.6.\n- Overall balance (percent of GDP): 2013: -1.8; 2014: -0.1; 2015: -0.8; 2016: 12.4; 2017 Proj: (blank).\n- Gross debt (percent of GDP): 2013: 84.7; 2014: 82.4; 2015: 68.1; 2016: 54.0; 2017 Proj: 41.1.\n- Net debt (percent of GDP): 2013: 62.2; 2014: 55.8; 2015: 49.3; 2016: 41.9; 2017 Proj: 32.9.\n- Current account balance (percent of GDP): 2013: 6.0; 2014: 5.5; 2015: 8.0; 2016: 6.6; 2017 Proj: (blank).\n- Gross external debt (percent of GDP): 2013: 248.7; 2014: 205.5; 2015: 180.0; 2016: 125.1; 2017 Proj: 114.9.\n\nIMF Executive Board Concludes 2017 Article IV Consultation with Iceland, June 22, 2017.\n\n---\n\n\n References\n\n- The Executive Board\n- Iceland and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland" } ], "bullets": [ "[Markdown version](/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/index.md)", "[Structured JSON version](/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/index.json)", "[Bundle manifest](/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/bundle-manifest.json)", "Published: June 22, 2017", "Real GDP growth reached 7.2 percent in 2016 and is projected at almost 6 percent in 2017 before tapering to around 2½ percent over the medium term.", "Tourism is the primary driver of growth; expansion has been driven by exports, private consumption, and investment rather than leverage.", "Bank credit to the nonfinancial private sector grew by only 4.3 percent in 2016 but is expected to gain pace going forward.", "Iceland’s current account surplus is projected to shrink modestly over time, with some export sectors suffering while others thrive.", "Output gap: 0.5 percent of potential output in 2013 (table entry).", "Inflation was 1.7 percent in May (2017).", "Continued strong appreciation of the króna reflects market response to increased external demand for tourism and should help guide output to its sustainable long‑run growth path.", "Directors commended the Central Bank of Iceland for a prudent monetary policy stance and the inflation targeting framework.", "Recommendations for the Central Bank:", "Executive Directors stressed that strengthening financial sector oversight is a key priority.", "Recommended actions:", "Capital flows:", "Directors recommended strict expenditure control to deliver a tighter‑than‑budgeted fiscal stance in 2017.", "Fiscal policy should be ready to tighten further if overheating risks materialize.", "Over the medium term, should fiscal space emerge under the Organic Budget Law, it could be used to support additional spending on infrastructure, healthcare, and education, guided by a comprehensive review of expenditures.", "Directors welcomed the recent public sector pension reform.", "Directors underscored the need for structural reforms to protect competitiveness and foster sustainable tourism.", "Recommendations:", "Gross domestic product (annual percent change): 2013: 4.4; 2014: 1.9; 2015: 4.1; 2016: 7.2; 2017 Proj: 5.8.", "Total domestic demand (annual percent change): 2013: 0.7; 2014: 5.2; 2015: 5.9; 2016: 8.7; 2017 Proj: 6.4.", "Private consumption (annual percent change): 2013: 1.0; 2014: 2.9; 2015: 4.3; 2016: 6.9; 2017 Proj: (blank for 2017 in table).", "Gross fixed investment (annual percent change): 2013: 2.2; 2014: 16.0; 2015: 17.8; 2016: 22.7; 2017 Proj: 9.9.", "Exports of goods and services (annual percent change): 2013: 6.7; 2014: 3.2; 2015: 9.2; 2016: 11.1; 2017 Proj: (blank in table).", "Imports of goods and services (annual percent change): 2013: 0.1; 2014: 9.8; 2015: 13.5; 2016: 14.7; 2017 Proj: 8.6.", "Gross domestic product (ISK bn.): 2013: 1,891; 2014: 2,006; 2015: 2,214; 2016: 2,422; 2017 Proj: 2,632.", "GDP per capita ($ thousands): 2013: 47.5; 2014: 52.2; 2015: 50.5; 2016: 59.6; 2017 Proj: 67.6.", "Private consumption (percent of GDP): 2013: 52.3; 2014: 49.8; 2015: 49.0; 2016: 49.1; 2017 Proj: (blank).", "Gross fixed investment (percent of GDP): 2013: 15.7; 2014: 17.2; 2015: 18.9; 2016: 21.2; 2017 Proj: 21.9.", "Gross national saving (percent of GDP): 2013: 21.5; 2014: 21.3; 2015: 24.6; 2016: 29.3; 2017 Proj: 28.5.", "Unemployment rate (percent of labor force): 2013: 5.4; 2014: 5.0; 2015: 4.0; 2016: 3.0; 2017 Proj: (blank).", "Employment (annual percent change): 2013: 3.3; 2014: 1.6; 2015: 3.4; 2016: 3.7; 2017 Proj: (blank).", "Labor productivity (annual percent change): 2013: 0.6; 2014: 0.8; 2015: 3.5; 2016: 2.5; 2017 Proj: (blank).", "Real wages (annual percent change): 2013: 0.9; 2014: (blank); 2015: 6.2; 2016: 8.1; 2017 Proj: (blank).", "Nominal wages (annual percent change): 2013: 4.8; 2014: (blank); 2015: 7.9; 2016: 10.1; 2017 Proj: (blank).", "Consumer price index (average): 2013: 3.9; 2014: 2.0; 2015: (blank); 2016: (blank); 2017 Proj: (blank).", "Consumer price index (end period): 2013: 4.2; 2014: 2.4; 2015: (blank); 2016: (blank); 2017 Proj: (blank).", "ISK/€ (average): 2013: 162; 2014: 155; 2015: 146; 2016: 134; 2017 Proj: 118.", "ISK/$ (average): 2013: 122; 2014: 117; 2015: 132; 2016: 121; 2017 Proj: 109.", "Central bank 7 day term deposit rate (for 2017, rate as of June 7): 2013: 5.75; 2014: 4.50; 2015: 5.00; 2016: 4.75; 2017 Proj: (blank).", "General Government Finances (percent of GDP) — Revenue: 2013: 42.1; 2014: 45.2; 2015: 42.0; 2016: 58.4; 2017 Proj: 41.6.", "General Government Finances (percent of GDP) — Expenditure: 2013: 43.9; 2014: 45.3; 2015: 42.9; 2016: 46.1; 2017 Proj: 40.6.", "Overall balance (percent of GDP): 2013: -1.8; 2014: -0.1; 2015: -0.8; 2016: 12.4; 2017 Proj: (blank).", "Gross debt (percent of GDP): 2013: 84.7; 2014: 82.4; 2015: 68.1; 2016: 54.0; 2017 Proj: 41.1.", "Net debt (percent of GDP): 2013: 62.2; 2014: 55.8; 2015: 49.3; 2016: 41.9; 2017 Proj: 32.9.", "Current account balance (percent of GDP): 2013: 6.0; 2014: 5.5; 2015: 8.0; 2016: 6.6; 2017 Proj: (blank).", "Gross external debt (percent of GDP): 2013: 248.7; 2014: 205.5; 2015: 180.0; 2016: 125.1; 2017 Proj: 114.9.", "[The Executive Board](http://www.imf.org/external/np/sec/memdir/eds.aspx)", "[Iceland and the IMF](http://www.imf.org/external/country/ISL/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/index.md", "json": "/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/index.json", "bundleManifest": "/en/news/articles/2017/06/22/pr17240-imf-executive-board-concludes-2017-article-iv-consultation-with-iceland/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T20:57:22.006Z" }