Oxus Com

Main Menu

  • Home
  • Net present value
  • Trustee
  • International monetary system
  • Principal-Agent Theory
  • Banking

Oxus Com

Header Banner

Oxus Com

  • Home
  • Net present value
  • Trustee
  • International monetary system
  • Principal-Agent Theory
  • Banking
International monetary system
Home›International monetary system›IMF Executive Board concludes 2021 Article IV consultations with Iceland

IMF Executive Board concludes 2021 Article IV consultations with Iceland

By Terrie Graves
June 8, 2021
0
0

Washington, DC: On June 4, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Iceland.

Iceland entered the COVID-19 crisis from a position of strength and stands favorably in its handling of the pandemic. Net and gross public debt has fallen by more than 50 percentage points of GDP since the global financial crisis, private and external debt has fallen by 200% of GDP, and international reserves have reached around 30% of GDP. Bank balance sheets are strong, with significant capital and liquidity buffers. The available policy space has enabled a rapid and substantial policy response to the pandemic, with fiscal, monetary and macroprudential measures mitigating the impact on households and businesses. The COVID-19 cases were contained quickly and vaccinations progressed as planned, with more than 60% of the population over 16 having received at least one dose.

Nevertheless, the impact of the pandemic on the economy has been significant. The collapse in global tourist flows has affected Iceland’s growth engine, which relies heavily on contact-intensive sectors. Real GDP declined 6.6%, unemployment rose sharply, the current account surplus declined, and inflation exceeded the reporting range in 2020. A modest recovery is expected to take hold in 2021, GDP expected to reach its 2019 level the following year. Scars from a slow expected recovery in tourism are expected to keep GDP 3% below its pre-COVID trend in 2026. Risks to the outlook are significant, mainly due to uncertainty over the development of the market. pandemic at national and international level and global outlook. revival of tourism.

Board assessment [2]

The executive directors praised Iceland for handling the severe impacts of the COVID-19 pandemic, thanks to the strong policy framework and cautiously accumulated buffers. Looking ahead, Directors underscored the difficult medium-term economic outlook and encouraged sound macroeconomic policies and structural reforms to enhance sustainable growth, financial stability and economic diversification.

Directors agreed that the budget support budgeted for this year would help support domestic demand, ease scars and provide insurance against downside risks. Directors also believed that Iceland’s medium-term fiscal policy plans would balance the continued need for support to the economy well with fiscal sustainability considerations. They noted that these plans appropriately refocus fiscal policy from vital support towards active labor market policies and investments in physical and human capital. Maintaining the greatest fiscal transparency will be crucial to preserve confidence in the fiscal framework.

Directors stressed that data-driven monetary policy rate decisions would remain essential to support confidence and mitigate inflation risks given the high degree of uncertainty. With the external position aligned with desirable fundamentals and policies, directors advised the CBI to continue reducing its presence in the forex market as the effects of the pandemic wear off. They also called for the completion of the ongoing reform of foreign exchange legislation in order to consolidate the liberalization of the exchange system and to clarify the conditions for possible recourse to measures to manage capital flows.

Directors stressed that emerging business vulnerabilities and real estate market risks should be addressed in order to keep the financial system strong. They recommended close monitoring of the impacts of the pandemic on corporate and bank balance sheets and the deployment of macroprudential measures to mitigate risks associated with rapid growth in bank mortgage credit.

Directors stressed that the upcoming review of the financial oversight architecture should ensure that the powers and resources of the CBI are commensurate with its expanded responsibilities. They stressed that the upcoming privatization of banks requires vigilance to preserve high quality property. Directors commended the authorities for quickly completing the actions required to move Iceland off the FATF gray list and encouraged them to continue improving the effectiveness of AML / CFT.

Directors stressed that Iceland’s post-pandemic growth strategy should strive to further diversify and build the resilience of its economy. The strategy should aim to promote safe and sustainable tourism, support innovation, strengthen human capital, reduce regulatory burdens, seek to better align wages and productivity, and ensure that targets are met on time. climatic conditions of Iceland.

Iceland: Main Economic Indicators, 2015-2 1

2015

2016

2017

2018

2019

2020

2021

Prel.

Proj.

National accounts (constant prices)

Gross domestic product

4.4

6.3

4.2

4.7

2.6

-6.6

3.7

Total domestic demand

6.1

7.7

7.6

4.4

0.2

-1.3

2.0

Private consumption

4.5

6.7

8.0

4.8

1.9

-3.3

3.0

Public consumption

-0.1

0.9

2.9

4.7

3.9

3.1

0.6

Gross fixed investment

21.5

18.0

10.6

1.2

-3.7

-6.8

4.4

Net exports (contribution to growth)

-1.1

-0.8

-2.9

0.7

2.1

-5.4

1.7

Exports of goods and services

8.9

11.0

5.1

1.7

-4.6

-30.5

16.3

Imports of goods and services

13.5

14.6

11.8

0.5

-9.3

-22.0

11.8

Output gap (percentage of potential output)

-1.1

0.9

1.3

3.0

2.4

-4.5

-2.3

Selected indicators

Gross domestic product (billion ISK)

2 311

2,512

2,642

2,840

3,045

2 941

3 132

Gross domestic product ($ bn)

17.5

20.8

24.7

26.2

24.8

21.7

24.2

GDP per capita (in thousands of dollars)

53.2

62.5

73.1

75.3

69.6

59.6

65.3

Private consumption (percentage of GDP)

49.7

49.3

50.1

50.3

49.9

51.4

51.5

Public consumption (percentage of GDP)

23.4

23.0

23.7

24.2

24.4

27.5

26.8

Gross fixed investment (percent of GDP)

19.3

20.9

21.8

21.6

20.6

21.1

21.8

Gross national savings (percentage of GDP)

25.0

29.2

26.0

25.7

27.0

22.7

22.8

Unemployment rate (percentage of labor force)

4.5

3.3

3.3

3.1

3.9

6.4

6.0

Employment

3.9

4.1

1.0

1.8

0.9

-3.0

0.8

Labor productivity

1.1

4.2

2.8

1.8

1.6

-3.8

3.0

Real wages

5.9

7.2

5.6

3.7

1.8

3.4

0.7

Nominal wages

7.6

9.0

7.5

6.5

4.9

6.3

4.3

Consumer price index (average)

1.6

1.7

1.8

2.7

3.0

2.9

3.6

Consumer price index (end of period)

2.0

1.9

1.9

3.7

2.0

3.6

3.0

ISK / € (average)

146

134

121

128

141

157

…

ISK / $ (average)

132

121

107

108

123

135

…

Terms of trade (average)

6.8

2.7

1.5

-3.7

-0.7

-2.3

-3.0

Money and credit (end of period)

Base currency (M0)

27.8

3.0

37.9

-1.7

-9.2

11.8

6.2

Broad money (M3)

5.6

-4.6

5.0

7.0

6.6

7.4

8.4

Bank credit to the non-financial private sector

3.5

4.4

9.2

11.9

2.9

10.5

3.5

Central bank 7-day term deposit rate 1 /

5.75

5.00

4.25

4.50

3.00

0.75

0.75

General public finances 2 /

Returned

43.2

59.1

45.4

44.9

41.9

42.4

40.3

Spent

43.6

46.5

44.5

44.0

43.4

49.7

49.4

Global balance

-0.4

12.5

1.0

0.9

-1.5

-7.3

-9.1

Structural primary balance

3.4

3.6

2.0

0.8

-1.4

0.3

-2.5

Cyclically adjusted primary balance

3.8

15.0

3.3

1.6

-0.7

-2.4

-5.8

Gross debt

97.2

79.9

69.4

61.1

68.3

79.9

80.0

Net debt

78.0

65.2

57.9

48.6

55.4

63.8

67.2

Balance of payments

Current account balance

5.6

8.1

4.2

3.8

6.4

1.0

0.7

of which: balance of services

8.9

10.5

10.6

9.0

8.5

2.5

3.4

Capital and financial account (+ = exit)

4.8

8.5

1.7

5.5

6.8

5.4

0.6

of which: direct investment, net (+ = exit)

-4.0

-3.5

-0.7

1.7

3.1

2.5

2.3

Gross external debt

174.8

125.1

90.3

73.3

76.5

86.0

75.4

Central bank reserves ($ bn)

5.0

7.2

6.6

6.1

6.7

6.4

5.9

Sources: CBI; Ministry of Finance; Statistics Iceland; and IMF staff projections.

1 / For 2021, rate at the end of April.

2 / In 2020, the definition of general government was broadened to include 24 new entities, the most important of which are the IL Fund and the Student Loan Fund.


[1] Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with its members, usually annually. A team of employees visits the country, collects economic and financial information and discusses with those responsible for the development and economic policies of the country. Back at headquarters, the staff prepare a report which forms the basis for the Board’s discussion.

[2] At the end of the discussion, the Chief Executive Officer, in his capacity as Chairman of the Board, summarizes the views of the Executive Directors, and this summary is sent to the country’s authorities. An explanation of all the qualifiers used in the summaries can be found here: https://www.IMF.org/external/np/sec/misc/qualifiers.htm .

/ Public distribution. This material is from the original organization and may be ad hoc in nature, edited for clarity, style and length. View full here.

Related posts:

  1. Opinion | The Biden revolution continues
  2. International Funds Publication, March 2021 | Hogan Lovells
  3. Why the highly effective Ukrainian oligarchs stand between the rulers of Kiev and Biden
  4. Mexican finance minister optimistic about 2021
Tagscentral bankcovid pandemicfinancial systemfund imfinternational monetarymonetary fundreal estate

Categories

  • Banking
  • International monetary system
  • Net present value
  • Principal-Agent Theory
  • Trustee

Recent Posts

  • Glass walkway near Amravati to provide thrilling experience for adventure tourists from mid-2023 | Bombay News
  • Township of Perry. trustees get advice on sunshine law | News, Sports, Jobs
  • Wickremesinghe chose the Sri Lankan Prime Minister to ease the crisis
  • Concerns that illiquid rules will increase governance burden on trustees
  • Does Your Country Really Need Digital Money?

Archives

  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • March 2020
  • Terms And Conditions
  • Privacy Policy