Standard and Poor’s Predicts Trouble for Iceland Skip to content

Standard and Poor’s Predicts Trouble for Iceland

According to a recent report from the US-based financial research company Standard and Poor’s, Iceland and Latvia will have trouble coping with a more limited access to loans on the international market following the US housing crisis.

The report says the Icelandic economy has suffered from overexpansion recently; the real estate market has hit the roof and there has been a high demand for loan capital, Markadurinn, a weekly Fréttabladid business supplement, reports.

The Icelandic banks have made indebted takeovers to a great extent, the report continues, and the Icelandic Central Bank may be forced to raise the policy rate again, which is currently at 13.3 percent.

Björn Rúnar Gudmundsson, director of local Landsbanki Bank’s analysis division, said the Icelandic economy is well prepared to handle a period of disturbance after recovering from a negative discussion about Icelandic financial institutions in March 2006.

Many of the problems facing the Icelandic economy were solved during that period, Gudmundsson said. “The banks have protected themselves against the fluctuating currency of the króna and the state is better prepared [than in March 2006].”

“We also have to consider that the banks here do not have much to do with the disturbance on the American mortgage market. Overall, we are better prepared now than during the last phase of disturbance,” Gudmundsson concluded.

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