Economics professor doubts Icelandic economy can handle new smelters Skip to content

Economics professor doubts Icelandic economy can handle new smelters

Icelandic National Broadcasting Service, RÚV, continues to report on public reaction to the announcement earlier this week of a memorandum of understanding between Alcoa and the Icelandic government concerning a feasibility study for a new aluminum smelter near Húsavík.

RÚV quotes professor of economics and director of the Economics Institute at the University of Iceland, Tryggvi Thór Herbertsson, saying that the Icelandic economy is unable to handle all the projects currently being planned.

In addition to Alcoa’s proposed new smelter, Alcan and Century Aluminum are also reported to be interested in adding capacity to their existing operations in Iceland.

Other proposed state-sponsored projects include a new hospital in Reykjavík and a new road from Reykjavík to Kjalarnes, the so-called Sundabraut.

According to RÚV, Tryggvi Thór said that “nobody thinks we can carry all of [the proposed projects] out at the same time…that would be far too much.”

Jón Bjarki Bentsson at Íslandsbanki’s research department said to RÚV that if the smelters are built other export industries would run into trouble. He also said that the Icelandic economy was flexible and had adjusted well in the past, both to downturns and upswings. If the projects were to move ahead, Icelanders could expect high interest rates and a high exchange rate, said Jón Bjarki.

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