Iceland: 2025 Article IV Consultation-Press Release; Staff Report and Statement by the Executive Director for Iceland
IMF Staff Country Reports, June 24, 2025
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- Iceland: 2025 Article IV Consultation-Press Release; Staff Report and Statement by the Executive Director for Iceland
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Bibliographic details
- Published: June 24, 2025
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798229014298.002
Key economic outlook and projections
- Growth decelerated in 2024.
- Growth is expected to rise to 1.6 percent in 2025 and 2.2 percent in 2026.
- Inflation is projected to decline to the Central Bank of Iceland’s 2.5 percent target in the second half of 2026.
- The direct impact of escalating global trade tensions is projected to be limited.
Fiscal policy assessment and recommendations
- The authorities’ plans to turn the fiscal deficit in 2024 into a surplus by 2028 are appropriate given the need to rebuild buffers.
- Details on the planned fiscal measures to achieve these targets have enhanced the credibility of the consolidation.
- Policy implication: continue implementing the planned consolidation to rebuild fiscal buffers.
Monetary policy and reserves
- Monetary policy is suitably tight given still elevated inflation.
- Recommendation: the monetary stance should be reduced as inflation declines.
- Efforts to raise foreign exchange reserve coverage are welcome.
Structural policies and medium-term growth
- Investments in physical and human capital are needed to support medium-term growth.
- Continued efforts to promote innovation and reduce skills mismatches are needed.
- Taxation can play a supportive role in reducing housing market imbalances.
Iceland: 2025 Article IV Consultation-Press Release; Staff Report and Statement by the Executive Director for Iceland
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- 1islea2025001-print-pdf