Wow Air’s bankruptcy could lead Iceland to enter its second recession in 10 years.
With Wow Air going to the dogs because of competition from Norwegian on transatlantic flights and the increase of fuel price, 1100 employees lost their jobs. Iceland’s central bank has dreadfully decreased its growth forecasts for 2019, going from 1,8% to 0,4% after Wow Air’s bankruptcy. Arion, an Icelandic bank, estimated that tourism should decrease from 16%. Since 2008, tourism has become the main economic activity in Iceland, in 2010 only 450,000 tourists came to visit the country against 2 million in 2018, representing 23% of Iceland’s GDP.
Following 2008’s crisis, all three of the country’s major privately owned commercial banks who were in business with the Netherlands and the UK had difficulties in refinancing their short-term debt and a run on deposits. Hence, Iceland knew an economic depression from 2008 to 2010. This time, forecasts predict an unemployment increase of 3,9%. However, Iceland’s central bank should set up monetary policies able to maintain inflation.