Icelandic economy remains robust

Icelandic economyThe Icelandic economy is in less trouble than many media reports make out, says the Icelandic Minister of Finance, Arni Mathiesen, in a report by Reuters.

“The krona certainly was too strong, [but] now it‘s too weak. In the end it will come back closer to the average,” said the minister at a recent meeting in Hamburg.

Mathiesen went on to criticise ratings agencies’ recent downgrading of Iceland‘s credit rating, saying that the agencies are probably acting on media speculation, rather than the actual state of the Icelandic economy. “But then again the changes in the ratings aren’t dramatic,” he adds.

The Icelandic economy is experiencing a slowdown at the end of an unprecedented period of growth that has seen the north Atlantic island become one of the richest nations in the world. The country owes much of its success to the burgeoning banking sector.

Iceland’s three main banks, Glitnir, Landsbanki and Kaupthing, have seen several ratings cuts and a string of bad news since the New Year, but Mathiesen still sees a bright future: “I think [the banks’] position, with regards to how they are financed, is better than you would observe with banks generally in Europe or America.”

Iceland‘s economic ‘crisis’ has largely been fuelled by media speculation, but the minister believes that the situation will resolve itself as more hard facts come to light. In recent weeks, the Icelandic krona has stopped its downward spiral and has even seen modest gains.