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Iceland: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iceland
Author:
International Monetary Fund. European Dept.
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2023: Issue 217
Language:
English
Publication Date:
23 Jun 2023
DOI:
https://doi.org/10.5089/9798400246784.002
ISBN:
9798400246784
ISSN:
1934-7685
Pages:
90
Keywords:
inflation expectation; headline inflation; monetary policy horizon; deteriorating inflation outlook; cash flow; policy tightening; Inflation; Fiscal stance; Pension spending; Financial Sector Assessment Program; Government finance statistics; Global
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The 2023 Article IV Consultation discusses that the Icelandic economy has shown remarkable resilience and rebounded quickly from the multiple shocks in recent years. The economy is currently operating well above potential, which, together with high import and house prices, has pushed inflation significantly above target, and contributed to external imbalances. While growth is expected to moderate to 3.2 percent in 2023 and 1.9 percent in 2024 on headwinds from abroad and tight macroeconomic policies, the medium-term outlook is favorable. In the near term, policy tightening coupled with headwinds from the deteriorating terms of trade will dampen domestic demand and reduce imbalances, though private consumption growth is likely to remain robust on a further drawdown of household savings and strong employment growth supported by continued immigration. Banks could face funding pressures if pension funds were to re-direct their investments from domestic to foreign markets.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund