Financial and Mortgage Portfolio Overview
Alternative scenarios demonstrate impact of key uncertainties
COVID-19, war in Ukraine and upcoming wage negotiations could have significant impact
Highlights
The economic outlook for Iceland, like the
global outlook, has fluctuated widely in
recent quarters
ISB Research has identified three major
sources of uncertainty for the near-to-
medium term economic development:
The war in Ukraine
COVID-19 developments
Upcoming private sector wage
negotiations in 4Q2022
GDP growth, %
3.4
5.9
5.0
3.3
3.1
2.7
2.6
2.3
1.9
Inflation, %
8.9
7.6
6.3
6.0
5.4
3.9
3.3
2.8
An optimistic scenario assumes a more
favourable outcome for those factors than
2022
2023
Pessimistic ■ Baseline
2024
2022
2023
2024
■Optimistic
■ Pessimistic ■Baseline
■Optimistic
the baseline forecast while the opposite
is true in the pessimistic scenario
It is assumed that there is roughly a 10% Trade-weighted exchange rate index
probability of a more favourable outcome
than the optimistic scenario and the
converse holds for the pessimistic one
GDP growth could prove 1.2% higher in
2022-2024 than baseline if those three
factors develop relatively favourably
Should the three factors prove more
challenging, GDP growth could prove
1.9% lower in the period
It should be noted that the pessimistic
scenario is not a stress scenario, and it is
possible to sketch out a more
unfavourable path than is done here
205
187 184
Unemployment, % of labour force
6
5.5
200
190
181 175
180
170
4.4
4.1
3.7
3.0
2022
2023
2024
2022
Pessimistic
Baseline Optimistic
2023
Pessimistic ■Baseline
Optimistic
4.5
3.6
3.0
2024
1.7
Sources: Islandsbanki Research forecast.
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August-September 2022View entire presentation