New economic forecasts released
The recession is caused by the global coronavirus pandemic which has restricted most international transport links and therefore had a massive impact on the Icelandic tourism industry, the report states.
It is expected that private consumption will be down 6.1 percent this year, export revenues by 30 percent, and that average unemployment will stand at 8.2 percent.
The report also forecasts a sharp turnaround next year, with GDP predicted to go up by 4.9 percent and economic growth of 2.5 to 2.9 percent in the coming years. Private consumption is forecast to rise by 5.5 percent next year, export revenues by 19 percent, and average unemployment is expected to be 6.8 percent.
National expenditure is forecast to be 4.4 percent down this year and a further 4.3 percent next year.
These figures are broadly similar to those in the latest OECD forecast that predicts a 5.7 percent economic contraction in Iceland over the two years from Q4 2019 to Q4 2021. If true, Iceland would experience the deepest recession of any OECD member country.
The OECD predicts 7.4 percent unemployment in Iceland this year and six percent next year, which is less than many other countries in the organisation.
The OECD recommends Iceland amend laws to boost companies’ competitiveness, as well as investing public money in innovation and a push for economic diversification. The country’s large tourism sector has proven vulnerable to this major global shock.