Iceland’s New Government Doubles Deficit Estimate for 2013

Iceland’s new government expects the country’s budget deficit to be double previous estimates as tax revenue slides and costs rise, according to new calculations from the Finance Ministry.

The north Atlantic island’s 2013 deficit is expected to widen to 50 billion kronur ($415 million), compared with a December budget estimate of 21 billion kronur. In 2014, the deficit is expected to widen to 22 billion kronur, compared with a surplus of 5 billion kronur in an earlier estimate.

Reaching a budget surplus “can’t be completed without considerable arrangements in the state’s finances,” the ministry said in a statement. Good returns in the state’s finances are a prerequisite “of conditions being created that allow for the removal of capital controls in the coming years.”

Boosting growth and exiting currency controls -- blocking as much as $8 billion in kronur denominated assets from leaving the economy -- are key goals of the new government, which took office after winning April 27 elections.

Prime Minister Sigmundur David Gunnlaugsson pledged on June 10 to push a new “action plan” to cut household debt burdens. Work on 10 different proposals will begin immediately and be completed next spring, he said.

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