Investment allowances cut, but major projects will not be delayed

Iceland’s government plans to reduce investment allowances for new construction next year, but Finance and Economic Affairs Minister Daði Már Kristófersson says the cuts will not delay major projects. He specifically named the National Arena, the New Landspítali hospital and a new prison.

Daði presented his 2027 budget proposal, which includes a five-billion-krona surplus. Iceland has not presented a budget without a deficit since 2019. The plan relies on 44 billion krona in spending restraint and 22.6 billion krona in new revenue.

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No.

Asked whether larger construction projects would be pushed into the future, Daði answered: “No.” He said the investment allowances were being reduced in consultation with project developers, and that none of the changes would delay construction.

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Investment allowances are being reduced, but they are all being reduced in consultation with the project developers. None of these changes will delay any construction.

He explained that investment allowances have not been fully used in recent years because developers have not managed to build projects worth all the money allocated. That has created uncertainty in state financing, he said, and the government has tried to address it.

Development of the government district, an area housing most ministries and undeveloped plots between the National Theatre and Skúlagata, is not planned within the next five years. Daði said the current situation did not require investment there, although concentrating state institutions could eventually bring efficiencies. He said the project might lie even further away than a 10-to-15-year plan, and that no decision had been made. The government is discussing with Reykjavík whether to reduce the district’s boundaries, potentially creating space for other services.

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No.