Iceland Slashes Interest Rate As Economy Seen Shrinking

Iceland's central bank on Wednesday cut its key interest rate by a half-point to 4.0 percent to stimulate the economy, as it forecasted a contraction this year for the first time in almost a decade

Reykjavik, (UrduPoint / Pakistan Point News - 22nd May, 2019 ):Iceland's central bank on Wednesday cut its key interest rate by a half-point to 4.0 percent to stimulate the economy, as it forecasted a contraction this year for the first time in almost a decade.

"The GDP growth outlook has changed markedly since the bank's last forecast. Output is now forecast to contract by 0.4 percent this year instead of rising by 1.8 percent, as was forecast in February," the bank said in a statement.

The bank attributed the deterioration in the outlook mainly to declining tourism and reduced marine product exports.

"As a result, the positive output gap will close and slack emerge in the near future," the bank said.

A report published by the country's biggest bank Landsbankinn in January confirmed a slowdown in tourism in 2018.

While the number of visitors hit a new record of 2.3 million, the increase of 5.5 percent was the weakest rise since 2010.

During the period 2010-2017, the average annual increase in the number of visitors was 24.3 percent, according to Iceland's tourist board.

The bankruptcy of Icelandic low-cost carrier WOW Air in March was expected to have a negative impact tourism numbers and the economy, Statistics Iceland said.