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Iceland: 2024 Article IV Consultation-Press Release; and Staff Report
Author:
International Monetary Fund. European Dept.
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2024: Issue 221
Language:
English
Publication Date:
15 Jul 2024
DOI:
https://doi.org/10.5089/9798400282560.002
ISBN:
9798400282560
ISSN:
1934-7685
Pages:
82
Keywords:
monetary policy stance; holdings of SDR; calibrating Policy; inflation expectation; EU regulations-credit bureaus; Inflation; Central bank policy rate; Housing prices; Fiscal rules; Global
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The 2024 Article IV Consultation with Iceland highlights that following an impressive recovery from shocks in recent years, tight monetary and fiscal policies have slowed domestic demand growth, strengthened the current account, and started to lower inflationary pressures. A coordinated tightening of macroeconomic policies has successfully narrowed domestic and external imbalances built up during the post-pandemic period. Appropriately tight macroeconomic policies are expected to dampen economic growth in the near term, while medium-term growth prospects are favorable. Reactivation of the fiscal rules in 2026 presents an opportunity to revisit their design to ensure fiscal policy is both sustainable and contributes to macroeconomic stability. An application of the IMF’s Integrated Policy Framework to Iceland suggests some benefits of foreign exchange interventions during times of stress. Structural policies should focus on gradually reducing state involvement in collective wage bargaining, accelerating the green transition, and further diversifying the economy.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund