Iceland slashes interest rate

23 May, 2019 12:00 AM printer

REYKJAVIK: Iceland's central bank on Wednesday cut its key interest rate by a half-point to 4.0 percent to stimulate the economy, as it forecasted a contraction this year for the first time in almost a decade.

"The GDP growth outlook has changed markedly since the bank's last forecast. Output is now forecast to contract by 0.4 percent this year instead of rising by 1.8 percent, as was forecast in February," the bank said in a statement, reports AFP.

The bank attributed the deterioration in the outlook mainly to declining tourism and reduced marine product exports.

"As a result, the positive output gap will close and slack emerge in the near future," the bank said.