Government Introduces "Hopefully the Last" Economic Measures Skip to content

Government Introduces “Hopefully the Last” Economic Measures

By Gréta Sigríður Einarsdóttir

Photo: Golli. Finance Minister Bjarni Ben presents the government’s third economic response package, April 2020.

Several measures to combat the economic effect of the COVID-19 pandemic will be instituted or prolonged in the coming days, the government announced today.

The measures include a 30,000 ISK one-off addition to child care allowance for those who qualify for income-linked childcare allowance, and a repeat of last summer’s Travel Gift voucher, intended to encourage Icelanders to trade with the struggling domestic tourism industry. Furthermore, permissions to withdraw supplementary pension savings will be extended, closure and reopening grants will be extended and requirements for such grants expanded. Pay-back schedules for supportive loans will be rescheduled, long-term unemployed individuals will receive a one-off payment and funding for children and young adult mental health services will be increased. Students will be able to take student loans over the summer and additional student loans will be available for 2021-22

The government’s stated goal is to keep supporting homes and companies in the final stretch of the fight against the pandemic, claiming that “These measures will protect the foundation of society, protect people and companies’ income, and secure a powerful pushback for Iceland’s economy.” The government notes that economic prospects for 2022-26 suggest a speedy economic recovery and that even during the pandemic, purchasing power has increased and domestic demand only contracted by 1.9%, among the smallest contractions in European countries.

Minister of Finance Bjarni Benediktsson told RÚV that he hoped that these economic measures will be the last the government needs to introduce. He added that while these measures were costly, the treasury could support them. “I think this is the last time we need to introduce measures that are tailor-made to the unique conditions created through extensive gathering restrictions. Hopefully, brighter and more open times are ahead.” Bjarni stated that while these measures are expensive, he considered it money well spent. “The cost of not reacting is much higher,” he stated.

Additional child care allowance – A one-off payment of 30,000 for each child to all those who qualify for income-linked child care allowance

Withdrawal of supplementary pension savings – Period to apply for withdrawing pension savings extended for the duration of 2021

Closure grants – Extended for the duration of 2021 and maximum grant amounts raised

Pushback grants – extended throughout November 2021, new requirements for income loss created. Combined grants capped at 260 million.

Payment of supportive loans – payment schedule extended for 12 months.

Postponement of tax  payments – Companies who have postponed payment of taxes can now expect to pay them back in the summer of 2022

Green investment incentives – Incentives introduced to increase private investment, with a focus on green projects. 

Grant for restoring staff to previous employment ratio – Support for companies to restore employment ratio for staff in reduced employment.

Payments for long-term unemployed – A one-off payment of 100,000 for people experiencing long-term unemployment of 14 months or more

Income-linked unemployment benefits extended – the period of temporary extension of income-linked benefits, from three months to six, will be extended until February 1, 2022

Additional funding for children and young adult mental health services – 600 million to combat increased demand due to COVID-19

Additional funding for combatting mental health effects of the pandemic for children, senior citizens, people with disabilities, people of foreign origin and other vulnerable groups – 200 million to combat increased domestic violence, and ensure information flow to vulnerable groups

Travel Vouchers – Last summer’s travel gift voucher will be repeated for the summer of 2021, giving Icelanders a financial incentive to experience domestic tourism

Travel Insurance Fund – The Minister of Tourism will create a travel insurance fund, ensuring full refunds for travel agencies.

Summer loans for the school year of 2020-2021 – Repeating last year’s initiative to allow students to get subsistence loans over the summer.

Temporary raise of basic subsistence allowance for student loans – temporarily increasing the basic subsistence allowance for student loans.

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