Economic Crisis: Iceland 2008 Current Research Paper

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This program is focused onto the following directions:

Generating stability with exchange rates

Rebuilding confidence in the monetary policy

Better managing and restricting public debt

Reforming and restructuring the banking sector to insure more transparency and the implementation of internationally recognized policies (The Icelandic Government Information Center, 2008).

4. Short-term forecast for the economy

The 2008 has severely impacted the Icelandic economy. In light of the dramatic effects as well as the efforts put into the reconstruction and reconsolidation of the Islanding economy, major growths are not expected. In other words, it is generally assumed that the country will regain its stability through small and gradual victories, which will, for the time being, only manage to stabilize the economy. Growth rates are expected to remain low and for 2010 for instance, the growth rate of the gross domestic product is expected to be close to zero (Central Intelligence Agency, 2010).

In terms of actually achieved stability, this is expected to be accomplished by 2013, and it would constitute the results of years of austerity strategies. Throughout the austerity program, the spending of the government would be decreased and the federal budget would be better balanced among revenues and expenditures (The Icelandic Government Information Center, 2008).

Other aspects which could be forecasted include:

2010 is expected to close on a negative growth in GDP of 3.042 per cent; 2011 could however witness an increase in the gross domestic product. Economy Watch for instance estimates a 2.3 per cent increase in the country's national output.

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By 2012, the GDP growth rate could be of 4.5 per cent (Lansbanki, 2008)

Inflation in 2011 is expected to reach a value of 3.815 per cent, a significant decrease when compared to the current 12 per cent

The unemployment rate is expected to remain rather constant. Its 2011 value is estimated at 8.47 per cent of the labor force (Economy Watch, 2009)

At a national level, it is expected that the focus on private pension funds increases, meaning as such that their percentage in the GDP will significantly increase

The stability of the public finances will increase and the trade balances are expected to decrease in deficit

Despite the evolutions however, the Icelandic krona (ISK) is expected to remain weak within the international context (Landsbanki, 2008).

Similar to many other global regions, it is expected that the Icelandic economy gradually revive and that the political approach to the economy suffers modifications. While the past few decades have witnesses gradual deregulations and a decreasing political involvement within markets and economies, the following decades are expected to witness an opposing situation. In other words, the elimination of governmental control over the market has materialized in a globalization of the financial crush and efforts would be made to ensure that the situation does not repeat itself. And in this order of ideas, the governments -- including the Icelandic federal authority -- are expected to develop and implement more prudential policies, which focus primarily.....

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