"Iceland Country Risk Report Q2 2015" Published

Core Views

* Recent policy decisions by the current government are jeopardising the sustainability of Iceland's economic recovery.
* The debt relief plan, passed through parliament in late May 2014, will provide a short-term boost to consumption, at the expense of deteriorating external surpluses and reduced ability to meet external debt obligations.
* Despite the government set to announce its plan for removing capital controls by end-2014, we expect the process to be drawn out over several years, which will continue to hamper foreign investment into Iceland, capping long-term growth potential.
* Iceland will remain one of the most politically stable countries globally, even in the face of significant external account uncertainty.

Major Forecast Changes

* We have revised our inflation and interest rate projections for 2014 and 2015, following the surprise rate cut by the Central Bank of Iceland in November 2014. We are now forecasting the policy rate to drop another 25 basis points in 2015, to 6.50%, although inflation will pick up slightly to average 3.2%, from 2.3% in 2014, driven by a one-off increase in the VAT rate.

Full Report Details at
- http://www.fastmr.com/prod/974375_iceland_country_risk_report_q2_2015.aspx?afid=301

Key Risks To Outlook

* The biggest risk to our forecast is policy trajectory, particularly in terms of how the current government chooses to remove distortive capital controls. Any abrupt lowering of the controls would almost certainly lead to a rapid outflow of capital from the country, triggering a sell-off in the krona and a potential balance of payments crisis. We do not believe that this will happen over the next two years or so, but the potential fall-out is so large that the risk must be acknowledged.

The Iceland Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Iceland. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Iceland's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

* Forecast the pace and stability of Iceland's economic and industry growth through end-2019.
* Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
* Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
* Contextualise Iceland's country risks against regional peers using BMI's country comparative Risk Index system.
* Evaluate external threats to doing business in Iceland, including currency volatility, the commodity price boom and protectionist policies.

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