A leading bank has downgraded its forecast for Icelandic unemployment and public investment levels, although its forecast for national economic growth remains unchanged.
Íslandsbanki has just released its first financial forecast report since last September and attributes the most pessimistic outlook to the lingering pandemic resulting in slower economic recovery.
The report details various possible scenarios for the return of tourists. The one developed in a Kjarninn article predicts 9.4% unemployment in 2021, up from 7.6% four months ago. Iceland’s estimated unemployment figure last year was 8.6%, but Íslandsbanki expects the unemployment figure to fall to 5% for 2022.
Government plans and Statistics Iceland figures both point to a reduction in public spending in 2021, with Íslandsbanki predicting it will be around 20% lower than it had forecast last September.
However, the bank’s forecast for national economic growth in 2021 remains the same as last fall, with 3.2% expected – although it mostly comes in the latter part of the year.
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