Less Downturn But Slower Recovery for Iceland’s Economy

Goðafoss tourists Iceland

The Central Bank has lowered its interest rates by 0.25%, making the bank’s key interest rate now 3.5%. The decision is in line with the bank’s economic forecast, which projects less of a downturn in the near future than expected, but a slower recovery for the hard-hit tourism industry throughout next year. Arionbanki’s analysts share this outlook.

“According to the [Central] Bank’s new macroeconomic forecast, published in the August Monetary Bulletin, this year’s economic contraction will measure 0.2%, slightly less than was forecast in May,” a press release from the Central Bank reads. The bank cites several reasons for this change, including private consumption growth, and net foreign trade which have offset a contraction in tourism. The long-term economic outlook, on the other hand, is slightly less positive, according to the bank’s projections. “The GDP growth outlook for 2020 has deteriorated, however, as it now appears that it will take longer for tourism to recover after this year’s setbacks,” the press release states.

Tourists spending more and staying longer

Arionbanki analysts say the newest import and export figures from Statistics Iceland paint a better economic picture than many dared to expect following WOW air’s bankruptcy in March. Though tourist numbers have lowered significantly compared to last year, in general, figures from the tourism industry have turned out better than expected, partly due to the fact that foreign tourists are on average spending more per capita during their stay. “In light of the high card turnover growth per tourist compared to 2018, longer stays, and a weaker króna, it was expected that travel, or total tourist consumption, would contract less than the number of tourists,” the report states. “That became the case, and even more so, as tourist consumption grew by 0.1% year-on-year, despite a 19.2% reduction in tourists.”

Icelandair’s grounded jets outlast WOW’s effects

Central Bank Chief Economist Þórarinn G. Pétursson stated at a meeting today that the worsened long-term outlook is influenced by Icelandiar’s three Boeing 737 Max 8 planes which were grounded due to safety concerns. Icelandair announced on August 16 that the planes would remain grounded at least until next year, not until the end of October until previously expected. Þórarinn states that neither WOW air’s bankruptcy nor that of Primera Air had affected the revisions to the outlook.

Group Lawsuit Against Icelandair in Preparation

A group lawsuit against Icelandair on behalf of cabin crew members of the company is currently in preparation, RÚV reports. The crew members involved assert they have suffered health issues due to low air quality on board Icelandair flights. Certain crew members even sought medical assistance for symptoms they experienced following flights with the company.

Headaches, fatigue, and discomfort

Last September, the entire cabin crew in an Icelandair flight from Edmonton, Canada, went to hospital due to discomfort, headaches, and fatigue following the journey. Jens Þórðarson, Icelandair’s director of flight operations, said that an obstruction in airflow on the airplane was the most likely explanation for the crew’s symptoms. Air filters on the plane were changed after they were found to be somewhat dirty. Jens confirmed that Icelandair did not recognise the symptoms as a result of a work accident. In August of last year, four flight attendants at the company fell ill and were unable to work for a long period. The Transportation Accident Investigation Board was reported to be investigating the case.

Now a group lawsuit is being a prepared against Icelandair on behalf of these cases. Lawyer Óðinn Elísson confirmed in a conversation with RÚV that the matter was being looked into on behalf of several clients. The matter is still at the data collection stage. Berglind Hafsteinsdóttir, chairperson of the Icelandic Cabin Crew Association stated she could not commend on issues pertaining to individual members.

Group lawsuits in Iceland

There are few group lawsuits in Iceland’s legal history. Though the legal procedure can be compared to class action lawsuits in the US or group litigation orders in the UK, regulations for such cases are more strict in Iceland. Such group lawsuits became possible following the amendment of legislation on civil lawsuits in 2010.