Slump in Stock Value Costs State ISK Billions Skip to content

Slump in Stock Value Costs State ISK Billions

The Icelandic state treasury may lose ISK dozens of billions due to the plummet in the Icelandic stock market. The value of Icelandic stocks has dropped ISK 1,300 billion (USD 19.8 billion, EUR 13.0 billion) since mid-summer 2007.

In 2006, the Icelandic state profited more than ISK 32 billion (USD 487 million, EUR 321 million) from company taxes, and according to preliminary numbers from the Ministry of Finance, a profit of ISK 35 billion (USD 533 million, EUR 351 million) is expected for 2007, Fréttabladid reports [03.03.08].

Capital gain amounted to ISK 23.7 billion (USD 361 million, EUR 238 million) in 2006, and is estimated at more than ISK 25 billion (USD 381 million, EUR 251 million) for 2007.

However, because of turbulences that began in stock markets last fall, including the OMX Nordic Stock Exchange in Iceland, these financial forecasts may not be realistic anymore.

“It is obvious that since the profit of the banks has decreased considerably in this downswing, the earnings of the state treasury will as well,” professor at Reykjavík University’s School of Business Fridrik Már Baldursson said. “What counts for state finance is to maintain the balance and not let the fluctuations of the market have too much influence on their strategy.”

“It is clear that the state will lose some of its expected income,” agrees Gunnar Svavarsson, chairman of the Althingi parliament’s financial committee. He said his committee, as well as the economic and trade committees, are following the development in stock markets closely.

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