Includes 3 FREE quarterly updates
Core Views
Iceland's real GDP growth rate will be amongst the fastest in the developed world over our 10-year forecast period, expanding at an average of 2.7% per annum. However, it will not be until 2015 that Iceland returns to its peak pre-crisis level of real GDP.
The April 2013 general election will most likely see a change in government in Iceland, with a centre-right coalition replacing a centre-left administration. The most significant result of such a change would most probably be an end to the country's EU accession talks.
Despite potential changes to the direction of economic and foreign policy, over our 10-year forecast period we see Iceland enjoying a high degree of political stability. The country has a very solid security environment, few societal dividing lines and a high standard of living.
Major Forecast Changes
We have revised our CPI forecasts for Iceland, and now expect prices to rise by an average of 3.9% over our forecast period. With price pressures higher than in its developed peers, and the currency largely stable, Iceland will have to be careful to ensure that competitiveness in the key tourist sector does not ebb away.
Key Risks To Outlook
Global economic conditions could deteriorate markedly, stifling Iceland's export-driven recovery.
If the government decides to remove the country's capital controls too soon the result could be a disorderly depreciation of the krona.
Core Views
Iceland's real GDP growth rate will be amongst the fastest in the developed world over our 10-year forecast period, expanding at an average of 2.7% per annum. However, it will not be until 2015 that Iceland returns to its peak pre-crisis level of real GDP.
The April 2013 general election will most likely see a change in government in Iceland, with a centre-right coalition replacing a centre-left administration. The most significant result of such a change would most probably be an end to the country's EU accession talks.
Despite potential changes to the direction of economic and foreign policy, over our 10-year forecast period we see Iceland enjoying a high degree of political stability. The country has a very solid security environment, few societal dividing lines and a high standard of living.
Major Forecast Changes
We have revised our CPI forecasts for Iceland, and now expect prices to rise by an average of 3.9% over our forecast period. With price pressures higher than in its developed peers, and the currency largely stable, Iceland will have to be careful to ensure that competitiveness in the key tourist sector does not ebb away.
Key Risks To Outlook
Global economic conditions could deteriorate markedly, stifling Iceland's export-driven recovery.
If the government decides to remove the country's capital controls too soon the result could be a disorderly depreciation of the krona.
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
CHAPTER 1: POLITICAL OUTLOOK
SWOT Analysis
BMI Political Risk Ratings
ICELAND Q2 2013
Domestic Politics
New Government Ahead
The April 27 general election will most likely result in a change of government, with a centre-right administration comprised of the
Independence Party and the Progressive Party taking office. The most significant shift in policy looks set to be an end to Iceland's EU
accession bid, with the pro-EU Social Democrat Alliance unable to complete talks before the end of the current parliamentary term.
Long-Term Political Outlook
Still Stable Despite The Economic Crisis
Over our 10-year forecast period, we see Iceland enjoying a high degree of political stability. It has a very solid security environment,
few societal dividing lines and a high standard of living. However, there are still major decisions to be made on whether to join the EU
and how to normalise the capital flows regime. Both of these issues pose long-term threats to political and economic stability.
CHAPTER 2: ECONOMIC OUTLOOK
SWOT Analysis
BMI Economic Risk Ratings
ICELAND Q2 2013
Economic Outlook
Tourism Sector Booming, But Low Investment A Worry
Real GDP growth will average 2.7% over our 10-year forecast period, which will make Iceland one of the world's fastest-growing
developed economies. However, with real GDP not forecast to reach pre-crisis levels until 2015, and US$ per capita GDP set to fail to
reach its 2007 highs until well into the 2020s according to our forecasts, it is clear that the rebalancing of the Icelandic economy will
have to remain a priority well into the long term.
CHAPTER 3: 10-YEAR FORECAST
The Icelandic Economy To 2022
Settling Into A More Moderate Long-Term Growth Trend
Real GDP growth over our 10-year forecast period is forecast to average 2.7%. This is lower than the 4.7% in the decade to 2007, but
higher than our 2012-2021 eurozone average forecast of 1.4%. However, population growth rather than productivity gains will be a
major driver of economic expansion.
TABLE: ICELAND LONG-TERM MACROECONOMIC FORECASTS
TABLE: ICELAND - EXCHANGE RATE
CHAPTER 4: BMI GLOBAL ASSUMPTIONS
Global Outlook
Past The Major Obstacles To Recovery
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS
Core Views
Major Forecast Changes
Key Risks To Outlook
CHAPTER 1: POLITICAL OUTLOOK
SWOT Analysis
BMI Political Risk Ratings
ICELAND Q2 2013
Domestic Politics
New Government Ahead
The April 27 general election will most likely result in a change of government, with a centre-right administration comprised of the
Independence Party and the Progressive Party taking office. The most significant shift in policy looks set to be an end to Iceland's EU
accession bid, with the pro-EU Social Democrat Alliance unable to complete talks before the end of the current parliamentary term.
Long-Term Political Outlook
Still Stable Despite The Economic Crisis
Over our 10-year forecast period, we see Iceland enjoying a high degree of political stability. It has a very solid security environment,
few societal dividing lines and a high standard of living. However, there are still major decisions to be made on whether to join the EU
and how to normalise the capital flows regime. Both of these issues pose long-term threats to political and economic stability.
CHAPTER 2: ECONOMIC OUTLOOK
SWOT Analysis
BMI Economic Risk Ratings
ICELAND Q2 2013
Economic Outlook
Tourism Sector Booming, But Low Investment A Worry
Real GDP growth will average 2.7% over our 10-year forecast period, which will make Iceland one of the world's fastest-growing
developed economies. However, with real GDP not forecast to reach pre-crisis levels until 2015, and US$ per capita GDP set to fail to
reach its 2007 highs until well into the 2020s according to our forecasts, it is clear that the rebalancing of the Icelandic economy will
have to remain a priority well into the long term.
CHAPTER 3: 10-YEAR FORECAST
The Icelandic Economy To 2022
Settling Into A More Moderate Long-Term Growth Trend
Real GDP growth over our 10-year forecast period is forecast to average 2.7%. This is lower than the 4.7% in the decade to 2007, but
higher than our 2012-2021 eurozone average forecast of 1.4%. However, population growth rather than productivity gains will be a
major driver of economic expansion.
TABLE: ICELAND LONG-TERM MACROECONOMIC FORECASTS
TABLE: ICELAND - EXCHANGE RATE
CHAPTER 4: BMI GLOBAL ASSUMPTIONS
Global Outlook
Past The Major Obstacles To Recovery
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS (%)
TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS