The default rate on loans taken by Icelandic companies has doubled in the second quarter of 2008 compared to the first three months of the year, according to new statistics from Financial Supervisory Authority (FME).
The default rate among individuals is also increasing, Fréttabladid reports.
At the end of March 2008, 0.5 percent of companies in Iceland defaulted on their financial obligations, compared to 1.1 percent of companies which were not able to pay their debts at the end of June 2008.
“I think the situation will worsen considerably in the coming fall and winter,” said Knútur Signarsson, managing director of the Federation of Icelandic Trade (FÍS), adding that unpaid debts will obviously increase when interest rates are far too high, the currency rate of the ISK drops and access to credit is limited.
Earlier this month the FÍS requested assistance from the government in a full-page advertisement in the daily newspaper Morgunbladid without any reaction. Signarsson emphasized the need for intervention by the government.
Finnur Oddsson, managing director of the Iceland Chamber of Commerce, said the rising number of unpaid debts reflects the rapidly worsening operational environment for companies in Iceland for the past few months.
Oddsson said it is important that everyone works together on reducing inflation and lowering interest rates.
Vilhjálmur Egilsson, managing director of the Confederation of Icelandic Employers (SA), said that although unpaid debts are increasing, they are not particularly high in a historical context.