Great Profit Loss for Iceland's State Treasury Predicted

Iceland’s Central Bank and Ministry of Finance predict a five to eight percent lower economic growth in Iceland in 2010 than in 2007. Financial analysts say the state treasury’s profits will thus decrease by up to ISK 150 billion (USD 2.0 billion, EUR 1.3 billion) in three years.

According to Fréttabladid, the main reasons is a drop in private consumption—value-added tax (VAT) is one of the state treasury’s most important sources of income—and a general economic downturn.

The Central Bank expects private consumption to decrease by 13 percent until 2010, while the Ministry of Finance is forecasting an eight percent recession in private consumption.

Foreseeable economic depression will also cause higher expenditure for the state treasury, for example because of a higher unemployment rate which is expected to increase to four percent.
IcelandReview.com