Boston, MA -- (SBWire) -- 08/07/2013 --The decision of the new centre-right government, elected in the April 2013 elections, to bring to an end the EU membership bid is of little surprise. Given that opinion polls have long suggested Icelanders would vote against accession, and there is a large eurosceptic majority within parliament, we see the decision as adding to longterm political stability. Iceland remains a member of the European Economic Area, and has strong international policy anchors within this framework.
Real GDP growth will be slightly above long-term trend at 2.6% over our 10-year forecast period. This rate of economic expansion will be among the fastest for any developed nation, but it will still take until 2015 for real GDP to reach pre-crisis levels.
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Fostering higher levels of investment will be crucial for the Icelandic government in order to bolster real GDP growth. Residential construction already shows some signs of starting to pick up again, but additional public sector investment in infrastructure will be needed if alternatives to a banking-led long-term growth model is to be found.
Major Forecast Changes
It is looking increasingly likely that gross fixed capital investment will weigh against a marked acceleration of economic output in 2013, and as such we have revised down our real GDP growth forecast to 2.0% in 2013, which is just a little higher than the Statistics Iceland 1.8% forecast.
Key Risks To Outlook
Global economic conditions could deteriorate markedly, stifling Iceland's export-driven recovery.
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Iceland Business Forecast Report Q3 2013 - New Market Research Report
Recently published research from Business Monitor International, "Iceland Business Forecast Report Q3 2013", is now available at Fast Market Research