Icelandic Economic Forecast Downgraded

A leading bank has downgraded its forecasts for levels of Icelandic unemployment and public investment, although its prediction of national economic growth remains unchanged.

Íslandsbanki has just released its first financial forecast report since last September, and puts the more pessimistic outlook down to the persistent pandemic resulting in a slower economic recovery.

The report details various possible scenarios regarding the return of tourists. The one brought into focus in a Kjarninn article predicts 9.4% unemployment in 2021, as opposed to the 7.6% predicted four months ago. The estimated figure for Icelandic unemployment last year was 8.6%, but Íslandsbanki expects the jobless figure to fall to 5% for 2022.

Government plans and figures from Statistics Iceland both indicate a reduction in public spending in 2021, with Íslandsbanki predicting that it will be some 20% less than it had expected last September.

However, the bank’s prediction for national economic growth in 2021 remains as it did last autumn, with 3.2% expected – albeit coming mainly in the latter part of the year.

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