November 14, 2018
Strong real GDP growth is expected to continue in 2018, although at around 4 percent the pace will be somewhat slower than in previous years, on the back of moderating tourism growth.
", "publishDate": "2018-11-14", "sections": [ { "heading": "Macroeconomic outlook and projections", "content": "- Strong real GDP growth is expected to continue in 2018, although \"at around 4 percent\" the pace will be somewhat slower than in previous years, on the back of moderating tourism growth.\n- IMF staff projection: Gross domestic product (2018, Proj.) 3.7 (percentage change).\n- Over the medium term:\n - Growth is expected to taper to about 2½ percent.\n - Inflation is expected to remain near target.\n - The current account surplus is expected to settle at about 2 percent of GDP.\n- Unemployment rate: 2½ percent (remains well below its long-run average).\n- Inflation: described as \"close to target\" due to a robust supply response to past property price increases and slower tourism growth." }, { "heading": "Executive Board assessment — risks and policy stance", "content": "- Directors welcomed the favorable economic outlook and the dissipation of overheating concerns; past króna appreciation has helped guide growth to more sustainable rates.\n- Noted risks:\n - Strong oil prices.\n - Competitive pressures in the airline sector.\n - Escalating trade tensions.\n - Potentially excessive wage awards.\n - Brexit.\n- Fiscal policy:\n - Directors viewed the broadly neutral fiscal stance as appropriate in the near term.\n - Supported the authorities’ medium term fiscal plan aimed at further debt reduction.\n - Advised careful prioritization of expenditures (infrastructure, healthcare, education) to reach overall budget targets.\n - Recommended prioritizing expenditures based on medium term effects on growth and productivity, with less reliance on ad hoc revenues such as dividend flows and careful assessment of tax reforms.\n- Monetary and foreign exchange policy:\n - Directors agreed monetary policy should remain focused on price stability.\n - The inflation target should reflect households’ spending patterns and be understood by all.\n - Foreign exchange intervention should be limited to countering disorderly market conditions, with strong emphasis on maintaining reserve adequacy.\n- External position:\n - Directors judged Iceland’s external position to be broadly in line with fundamentals and desired policy settings." }, { "heading": "Financial supervision, capital flow measures, and structural policies", "content": "- Financial supervision:\n - Directors supported creating an integrated financial supervisor by merging the financial regulator into the central bank, covering all aspects of the financial sector including pension funds.\n - Emphasized ensuring a smooth transition and maintaining regulatory and operational independence.\n- Capital flow management:\n - Directors welcomed the authorities’ decision to halve the special reserve requirement on selected debt inflows.\n - Many Directors supported a gradual lifting as conditions permit; a few favored immediate removal.\n - Noted that capital flow management measures can have a useful role under certain conditions but should not substitute for warranted macroeconomic adjustment.\n- Structural reforms:\n - Supported ongoing initiatives to reform the wage bargaining system and anchor it on productivity growth and competitiveness.\n - Recommended increasing public spending on education.\n - Suggested a comprehensive strategy for further tourism development, including contingency plans.\n - Called for ongoing international efforts to ensure sustainable management of migratory marine species." }, { "heading": "Selected economic indicators and key statistics (2014–18, exact reported figures)", "content": "- National Accounts (constant prices) — Gross domestic product (percentage change):\n - 2014: 2.1\n - 2015: 4.5\n - 2016: 7.4\n - 2017: 4.0\n - 2018 Proj.: 3.7\n- Total domestic demand (percentage change):\n - 2014: 5.3\n - 2015: 6.4\n - 2016: 8.8\n - 2017: 7.0\n - 2018: 4.6\n- Private consumption (percentage change): 2014: 3.2; 2015: 7.2; 2016: 7.9; 2017: 5.4; 2018: (not separately listed in the table for 2018 projection).\n- Gross fixed investment (percentage change): 2014: 15.9; 2015: 19.7; 2016: 21.7; 2017: 9.5; 2018: 4.8\n- Net exports (contribution to growth): 2014: -1.5; 2015: -0.5; 2016: -0.2; 2017: -2.1; 2018: -0.7\n- Exports of goods and services (percentage change): 2014: 9.1; 2015: 10.9; 2016: 5.5; 2017: (not listed for 2018)\n- Imports of goods and services (percentage change): 2014: 9.8; 2015: 13.8; 2016: 14.5; 2017: 12.5\n- Output gap (percent of potential output): 2014: 0.0; 2015: 0.5; 2016: 2.4; 2017: 1.5\n- Selected indicators:\n - Gross domestic product (ISK bn.): 2014: 2,074; 2015: 2,288; 2016: 2,503; 2017: 2,615; 2018: 2,797\n - GDP per capita ($ thousands): 2014: 54.0; 2015: 52.2; 2016: 61.2; 2017: 70.2; 2018: 75.5\n - Private consumption (percent of GDP): 2014: 52.7; 2015: 50.1; 2016: 49.4; 2017: 50.3; 2018: 50.4\n - Public consumption (percent of GDP): 2014: 23.9; 2015: 23.4; 2016: 22.8; 2017: 23.3; 2018: 23.8\n - Gross fixed investment (percent of GDP): 2014: 17.2; 2015: 19.2; 2016: 21.5; 2017: 22.3\n - Gross national saving (percent of GDP): 2014: 21.2; 2015: 24.5; 2016: 29.1; 2017: 25.8; 2018: 25.5\n - Unemployment rate (percent of labor force): 2014: 5.0; 2015: 3.0; 2016: 2.8; 2017: (not separately listed for 2018 in the table)\n - Employment (percentage change): 2014: 1.6; 2015: 3.4; 2016: 1.8; 2017: 2.3\n - Labor productivity (percentage change): 2014: 0.2; 2015: 0.9; 2016: 3.6; 2017: 2.2; 2018: 1.4\n - Real wages (percentage change): 2016: 6.0; 2017: 5.6\n - Nominal wages (percentage change): 2016: 4.1; 2017: 7.6; 2018: 8.7\n - Consumer price index (average): 2014: 2.0; 2015: 1.7; 2016: 2.5\n - Consumer price index (end period): 2014: 0.8; 2015: 2.6\n - ISK/€ (average) 1/: 2014: 155; 2015: 146; 2016: 134; 2017: 121; 2018: 126\n - ISK/$ (average) 1/: 2014: 117; 2015: 132; 2016: 107; 2017: 106\n - Terms of trade (average): 2014: 3.3; 2015: 6.7; 2016: -1.0\n- Money and Credit (end period):\n - Base money (M0) (percentage change): 2014: -17.6; 2015: 27.8; 2016: 37.9; 2017: 7.7\n - Broad money (M3) (percentage change): 2014: 7.1; 2015: -4.6\n - Bank credit to nonfinancial private sector (percentage change): 2014: -2.4; 2015: 3.5; 2016: 4.4; 2017: 9.2; 2018: 7.5\n - Central bank 7-day term deposit rate 2/: 2014: 4.50; 2015: 5.75; 2016: 5.00; 2017: 4.75; 2018: 4.25\n- General Government Finances (percent of GDP unless otherwise indicated) 3/:\n - Revenue: 2014: 43.7; 2015: 40.7; 2016: 56.7; 2017: 42.4; 2018: 41.6\n - Expenditure: 2014: 43.8; 2015: 41.5; 2016: 44.3; 2017: 41.0; 2018: 41.0\n - Overall balance: 2014: -0.1; 2015: -0.8; 2016: 12.3\n - Structural primary balance: 2014: 1.2\n - Gross debt: 2014: 79.7; 2015: 66.0; 2016: 51.7; 2017: 40.0; 2018: 37.0\n - Net debt: 2014: 47.8; 2015: 39.6; 2016: 34.2; 2017: 30.3\n- Balance of Payments:\n - Current account balance 4/: 2014: 3.9; 2015: 5.2\n - Capital and financial account (+ = outflow): 2014: 5.1; 2015: 8.9\n - Gross external debt 5/: 2014: 198.8; 2015: 176.0; 2016: 124.4; 2017: 90.0; 2018: 75.9\n - Central bank reserves ($ bn.): 2014: 4.2; 2015: 6.5\n\nIMF Executive Board press release, November 14, 2018.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\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/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation" } ], "bullets": [ "[Markdown version](/en/news/articles/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/index.md)", "[Structured JSON version](/en/news/articles/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/index.json)", "[Bundle manifest](/en/news/articles/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json)", "Published: November 14, 2018", "Strong real GDP growth is expected to continue in 2018, although \"at around 4 percent\" the pace will be somewhat slower than in previous years, on the back of moderating tourism growth.", "IMF staff projection: Gross domestic product (2018, Proj.) 3.7 (percentage change).", "Over the medium term:", "Unemployment rate: 2½ percent (remains well below its long-run average).", "Inflation: described as \"close to target\" due to a robust supply response to past property price increases and slower tourism growth.", "Directors welcomed the favorable economic outlook and the dissipation of overheating concerns; past króna appreciation has helped guide growth to more sustainable rates.", "Noted risks:", "Fiscal policy:", "Monetary and foreign exchange policy:", "External position:", "Financial supervision:", "Capital flow management:", "Structural reforms:", "National Accounts (constant prices) — Gross domestic product (percentage change):", "Total domestic demand (percentage change):", "Private consumption (percentage change): 2014: 3.2; 2015: 7.2; 2016: 7.9; 2017: 5.4; 2018: (not separately listed in the table for 2018 projection).", "Gross fixed investment (percentage change): 2014: 15.9; 2015: 19.7; 2016: 21.7; 2017: 9.5; 2018: 4.8", "Net exports (contribution to growth): 2014: -1.5; 2015: -0.5; 2016: -0.2; 2017: -2.1; 2018: -0.7", "Exports of goods and services (percentage change): 2014: 9.1; 2015: 10.9; 2016: 5.5; 2017: (not listed for 2018)", "Imports of goods and services (percentage change): 2014: 9.8; 2015: 13.8; 2016: 14.5; 2017: 12.5", "Output gap (percent of potential output): 2014: 0.0; 2015: 0.5; 2016: 2.4; 2017: 1.5", "Selected indicators:", "Money and Credit (end period):", "General Government Finances (percent of GDP unless otherwise indicated) 3/:", "Balance of Payments:", "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)", "[The Executive Board](https://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/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/index.md", "json": "/en/news/articles/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/index.json", "bundleManifest": "/en/news/articles/2018/11/14/pr18424-iceland-imf-executive-board-concludes-2018-article-iv-consultation/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T22:19:53.737Z" }