IMF: ISK 470 Billion National Budget Deficit

According to an economic forecast by the International Monetary Fund (IMF), there will be an ISK 470 billion (USD 3.2 billion, EUR 2.5 billion) deficit on the Icelandic national budget until 2011. In 2009, the deficit is expected to be ISK 200 billion (USD 1.4 billion, EUR 1.1 billion).

The deficit will be funded with the publishing of bonds and the cost of interest rates because of the bonds might amount to ISK 280 billion (USD 1.9 billion, EUR 1.5 billion), Morgunbladid reports.

Reasons for this forecast are, amongst other things, reduced income for the state and severe recession in the economy, especially during next year. The IMF expects private consumption to decrease by 19.7 percent, public consumption by 23.7 percent and investment by 33.6 percent.

According to the IMF forecast, the total capitalization need of the Icelandic state in the coming years will be close to ISK 1,660 billion (USD 11.2 billion, EUR 8.8 billion).

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