Iceland review - 2016, Page 106

104 ICELAND REVIEW ICELAND REVIEW 105
INVEST IN ICELAND
SPECIAL PROMOTION
ICELAND’S ECONOMIC
OUTLOOK POSITIVE
Iceland’s economy continues to strength-
en and the outlook for 2016 looks posi-
tive. This positive outlook is reflected in
the stock market. Nasdaq Iceland’s OMXI8
index rose by 43 percent in 2015 and the
market has enjoyed a healthy growth in
recent years.
A variety of companies are listed on the
exchange, including businesses in retail,
fishing, transportation, insurance and oth-
er sectors. The largest listed companies,
Icelandair Group and Marel, have done
well over the past several years, and the
economy as a whole is estimated to have
grown 4.1 percent in 2015. Iceland is
poised for growth between 4 and 5 per-
cent in 2016. The country’s macroeconom-
ic prospects, along with the upcoming re-
laxation of capital controls, means foreign
investment could grow substantially in
2016.
Additionally, Iceland’s central bank
has raised its key rate three times since
June, to 5.75 percent, reflecting econom-
ic growth that is now substantially faster
than the Eurozone average.
GROWING EQUITY MARKET
There is continued growth in the equity
market and the prospects for 2016 look
good, says Páll Harðarson, president of
the Nasdaq Iceland Stock Exchange. “The
macroeconomic situation is helping and
the economy is doing well, with most indi-
cators positive,” he says, adding: “Iceland
is also enjoying low unemployment and
credit agencies have raised Iceland’s rat-
ings.” With respect to the bond market,
yields, with government bonds around six
percent, are attractive to international in-
vestors.
RELAXING CAPITAL CONTROLS
Iceland is in the process of lifting capital
controls that were put in place after the
2008 financial crisis. In 2008, Iceland be-
came one of the biggest casualties of the
global financial crisis when its debt-bur-
dened commercial banks collapsed under
the strain of the worldwide credit squeeze.
The value of the króna plummeted and Ice-
land was forced to seek a bailout from Eu-
rope and the International Monetary Fund
(IMF).
Lifting capital controls is an important step
in Iceland’s continued recovery, Páll high-
lights. “We are expecting to see a drasti-
cally different investment environment.
Relaxing capital controls opens the door
for more growth and more investment op-
portunities, and we could be seeing a new
wave of smaller growth companies enter-
ing the market.”
In January, it was announced that Iceland’s
pension funds would be allowed to invest
ISK 20 billion (USD 154 million) abroad in
the first four months of the year. As Iceland’s
pension funds are opening up, officials are
expecting more international assets to flow
in. With interest rates higher in Iceland than
in virtually every other developed econo-
my in the world, it is unlikely that locals will
be rushing to take their money out of their
bank accounts. In fact, it is more likely for-
eign investors will put more in.
The investment environment in Iceland looks bright, with strong growth in the equity
market, an attractive bond market, improved credit ratings and thriving tourism.