Dismal Figures on Balance of Trade Released Skip to content

Dismal Figures on Balance of Trade Released

Icelanders lost a total of ISK 117 billion (USD 1.42 billion, EUR 950 million) on their foreign assets over the second quarter of 2008, according to new figures from the Central Bank of Iceland. To some degree this loss can probably be attributed to losses on FDI (foreign direct investment), reports Morgunbladid [05.08.2008].

The current-account deficit increased by ISK 128 billion (USD 1.56 billion, EUR 1.04 billion) over Q2, again mainly due to losses on FDI. These results may cause serious concerns among foreign investors about the condition of Iceland’s economy, according to Ásgeir Jónsson, head of Kaupthing Bank’s Research Department. “I am worried about what will happen [today] when the market reacts to these figures,” comments Jónsson.

External debt [http://en.wikipedia.org/wiki/External_debt] increased by 53.5 percent in Q2 2008, now totaling ISK 496 billion (USD 6.04 billion, EUR 4.02 billion). This increase does not come as a surprise as the state treasury engaged in bond issues, much of which was bought up by foreign investors, in addition to foreign credit taken to strengthen the Central Bank’s foreign currency reserves.

Iceland’s IIP (international investment position) was negative by ISK 2,095 billion (USD 25.51 billion, EUR 17.00 billion), having deteriorated by ISK 27 billion over Q2 (USD 330 million, EUR 220 million). Foreign assets total ISK 8,430 (USD 102.65 billion, EUR 68.41 billion) billion while foreign liabilities total ISK 10,520 (USD 128.10 billion, EUR 85.37 billion). Commercial bank lending to foreign borrowers now totals about a third of Icelander’s foreign assets.

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