Financial crises have a beginning and an end
Glitnir Research has published a report on the prospects for the Icelandic economy following the current financial and currency crisis. The report also tries to address what implications are inherent in the possible involvement of the IMF.
Glitnir Research is predicting a relatively sharp contraction in 2009, coupled by substantial increase in unemployment simultaneously to high inflation at the beginning of the year. The contraction can be expected to be in the range of 3%-7%, inflation to range between 15% and 20% at the beginning of next year and unemployment to rise to 4%-5% in a short period of time. On the other hand, inflation will abate rapidly if the ISK does not depreciate further and labour market participants do not chase inflation with wage increases. The current account deficit should disappear quickly and the foreign debt position improve. Conditions in the economy could become considerably more favourable as early as 2010.