Iceland Mag

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Iceland Mag

Economy

Balance of payments positive for 14 consecutive quarters: Q3 surplus largest on record

By Staff

  • Landsbankinn bank The positive balance of payments is historic. Photo/Vísir

Iceland has been running a positive balance of payments since the first quarter of 2014. This represents a dramatic turnaround, as Iceland has historically run a persistent negative balance of payments. From 1995 until 2012 Iceland had a persistent negative balance. The balance of payments in the third quarter of 2017 was the second largest on record.

Tourism generated a turnaround
The primary reason for the improved balance of payments is the inflow of foreign currency due to tourism. A negative balance in the trade in goods in recent years has been outweighed by an even larger surplus in the trade in services. The positive balance of payments has contributed to a strengthening of the Icelandic currency, the Króna. 

Read more: First time since end of WWII: At end of Q3 2016 Icelandic assets abroad outstrip foreign debt

A new report by analysts at Landsbankinn bank stresses the historic nature of the change in the balance of payments. The positive balance during the third quarter of 2017 is the 14th in a row. This has contributed to a dramatic improvement in the net position of Iceland vis-a-vis the world. In the third quarter of 2016 Iceland had more assets than debts abroad. This was the first time this was the case since the end of WWII. Landsbankinn points out that currently Icelandic foreign assets exceed debts by 108 billion ISK (1,030 million USD, 870 million EUR).

The balance of payments is projected to be 5.4% in 2017.

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