From Iceland — Where Is The Economy Going?

Where Is The Economy Going?

Published April 13, 2011

In the wake of Iceland’s No vote on Icesave, there have been endless speculations on whether the economy will still continue to heal, or tank altogether. Contradictory analyses have arisen from reputable sources, further muddying the waters.
DV reports that Danske bank analyst Lars Christensen believes the Icelandic crown will strengthen by 25% over the next three years. Christensen has previously predicted, in 2006, the financial crisis that would come to be in Iceland in 2008 in an article he wrote entitled “Iceland: Geyser crisis”, which can be read in English on Landsbanki’s website (pdf file).
Christensen believes furthermore than the country’s GDP will increase by some three to four percent over the next two to three years. Other analysts are not so optimistic.
Market analysts Standard & Poor’s have just given Iceland a negative outlook, and are considering downgrading the country’s rating to BBB-, just one step above Junk.
“The prolonged dispute over the Icesave issue could weaken Iceland’s relationship with other European countries, increase its external financing risks, and hinder Iceland’s economic prospects as well as delay the lifting of capital controls and its return to international capital markets,” the rating agency said.
What ultimate effect the Icesave matter in EFTA court will have on the economy still remains to be seen.

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