IMF Staff Country Reports

Iceland: 2024 Article IV Consultation-Press Release; and Staff Report

July 15, 2024

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Format: Chicago

International Monetary Fund. European Dept. "Iceland: 2024 Article IV Consultation-Press Release; and Staff Report", IMF Staff Country Reports 2024, 221 (2024), accessed November 21, 2024, https://doi.org/10.5089/9798400282560.002

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Summary

The 2024 Article IV Consultation with Iceland highlights that following an impressive recovery from shocks in recent years, tight monetary and fiscal policies have slowed domestic demand growth, strengthened the current account, and started to lower inflationary pressures. A coordinated tightening of macroeconomic policies has successfully narrowed domestic and external imbalances built up during the post-pandemic period. Appropriately tight macroeconomic policies are expected to dampen economic growth in the near term, while medium-term growth prospects are favorable. Reactivation of the fiscal rules in 2026 presents an opportunity to revisit their design to ensure fiscal policy is both sustainable and contributes to macroeconomic stability. An application of the IMF’s Integrated Policy Framework to Iceland suggests some benefits of foreign exchange interventions during times of stress. Structural policies should focus on gradually reducing state involvement in collective wage bargaining, accelerating the green transition, and further diversifying the economy.

Subject: Central bank policy rate, Financial services, Fiscal policy, Fiscal rules, Housing prices, Inflation, Prices

Keywords: Calibrating Policy, Central bank policy rate, EU regulations-credit bureaus, Fiscal rules, Global, Holdings of SDR, Housing prices, Inflation, Inflation expectation, Monetary policy stance

Publication Details

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