Íslandsbanki issues new local government sector report
Icelandic municipalities’ revenues increased by 8% year-on-year in 2016, the fastest consolidated growth rate since 2007, when revenue growth measured 11%. Part A revenues were up 10% and Part B revenues by 3%. Combined Part A and B expenditures increased by 0.2%. Wage expense is the local authorities’ largest single expenditure item. These are among the findings published in Íslandsbanki Research’s new report on the local government sector.
Because revenues increased proportionally more than expenditures, the consolidated operating results before financing and irregular items improved from just under ISK 18bn to more than ISK 45bn, or 152%. The turnaround lies mainly in Part A operations, which generated a deficit of ISK 8.6bn in 2015 but a surplus of ISK 18.2bn in 2016.
Íslandsbanki Research expert Elvar Orri Hreinsson, author of the report:
“It is gratifying to see Iceland’s municipalities make such vast improvements in their operating results, which are better than they have been since 2007. They have reduced their debt rather steadily since 2009, creating scope for further infrastructure investment. Wage agreements and increased pension obligations have adversely affected the results in the recent term, but those effects were considerably less in 2016. It is both beneficial and important for Íslandsbanki and the general public to keep abreast of developments in the municipalities’ position.”