The outlook on government finances in Iceland is very good. Statistics Iceland recently reported that the general government surplus in 2017 was 38.7 billion ISK (400 million USD/320 million EUR), or 1.5% of GDP. The outlook for 2018 is also very good, not least thanks to larger than anticipated dividend payments by the state owned banks. The government of Iceland has announced that it plans to use money from the financial system to pay for investments in the country's physical and social infrastructure.
Government revenue 43.4% of GDP
In 2017, the general government was 38.7 billion ISK in surplus or 1.5% of GDP. The surplus in 2017 was significantly lower than in 2016, when it amounted to 12.6% of GDP, or 308.4 billion ISK (3.15 billion USD/2.54 billion EUR) surplus in 2016.
The primary reason for the high surplus in 2016 were one-time payments connected with an exit tax on foreign investors imposed in conjunction with the lifting of capital controls which had been imposed following the 2008 financial crash. Included in 2016 is extraordinary revenue of 384.2 billion ISK due to stability contribution from the estates of the fallen banks.
The general government total revenue in 2017 amounted to 1,109.6 billion ISK (11.3 billion USD/9.13 billion EUR), 43.4% of GDP compared with 57.8% in 2016. The general government total expenditure amounted to 1,070.9 billion ISK (10.9 billion USD/8.8 billion EUR), 41.9% of the 2017 GDP compared with 45.2% in 2016.
State owned banks finance investments in infrastructure
Bjarni Benediktsson, the minister of finance, has announced that the government is currently studying what it will do with a significant windfall from its investment in the financial system. The two state owned banks, Íslandsbanki and Landsbankinn have paid out significantly larger dividends than expected when the budget for 2018 was drawn up. The two banks will pay out 24 billion ISK (240 million USD/200 million EUR) more in dividends than envisioned in the budget. The budget envisioned a 35 billion ISK (350 million USD/290 million EUR) surplus which was to be used to pay down government debt.
This larger dividend payment allows the state to pay down debt faster, as well as to make significant additional investments in both social and physical infrastructure, Bjarni Benediktsson told the National Broadcasting Service, RÚV.
Read more: Economists argues the Icelandic treasury has made a small profit on the 2008 banking crash
Following the 2008 financial crash the state has acquired two of the largest banks in Iceland, Íslandsbanki and Landsbankinn. The state owns 95% of Íslandsbanki and 98.2% of Landsbankinn. The state also owns a 13% stake in Arion, the third major bank in Iceland. The state plans to sell its stake in Arion this year.
The outlook on government finances in Iceland is very good. Statistics Iceland recently reported that the general government surplus in 2017 was 38.7 billion ISK (400 million USD/320 million EUR), or 1.5% of GDP. The outlook for 2018 is also very good, not least thanks to larger than anticipated dividend payments by the state owned banks. The government of Iceland has announced that it plans to use money from the financial system to pay for investments in the country's physical and social infrastructure.
Government revenue 43.4% of GDP
In 2017, the general government was 38.7 billion ISK in surplus or 1.5% of GDP. The surplus in 2017 was significantly lower than in 2016, when it amounted to 12.6% of GDP, or 308.4 billion ISK (3.15 billion USD/2.54 billion EUR) surplus in 2016.
The primary reason for the high surplus in 2016 were one-time payments connected with an exit tax on foreign investors imposed in conjunction with the lifting of capital controls which had been imposed following the 2008 financial crash. Included in 2016 is extraordinary revenue of 384.2 billion ISK due to stability contribution from the estates of the fallen banks.
The general government total revenue in 2017 amounted to 1,109.6 billion ISK (11.3 billion USD/9.13 billion EUR), 43.4% of GDP compared with 57.8% in 2016. The general government total expenditure amounted to 1,070.9 billion ISK (10.9 billion USD/8.8 billion EUR), 41.9% of the 2017 GDP compared with 45.2% in 2016.
State owned banks finance investments in infrastructure
Bjarni Benediktsson, the minister of finance, has announced that the government is currently studying what it will do with a significant windfall from its investment in the financial system. The two state owned banks, Íslandsbanki and Landsbankinn have paid out significantly larger dividends than expected when the budget for 2018 was drawn up. The two banks will pay out 24 billion ISK (240 million USD/200 million EUR) more in dividends than envisioned in the budget. The budget envisioned a 35 billion ISK (350 million USD/290 million EUR) surplus which was to be used to pay down government debt.
This larger dividend payment allows the state to pay down debt faster, as well as to make significant additional investments in both social and physical infrastructure, Bjarni Benediktsson told the National Broadcasting Service, RÚV.
Read more: Economists argues the Icelandic treasury has made a small profit on the 2008 banking crash
Following the 2008 financial crash the state has acquired two of the largest banks in Iceland, Íslandsbanki and Landsbankinn. The state owns 95% of Íslandsbanki and 98.2% of Landsbankinn. The state also owns a 13% stake in Arion, the third major bank in Iceland. The state plans to sell its stake in Arion this year.
