Minister for Business Affairs Gylfi Magnússon stated in an interview today that the economic outlook for Iceland is better than expected and that there might not even be a recession in gross domestic product (GDP) in Iceland next year.
“The good news is that the outlook is slightly better than predicted and of course much better than assumed by the most pessimistic forecasts,” Magnússon told Fréttabladid. When asked how this development can be explained, the minister replied:
“Many factors are better than predicted: There is naturally considerable recession in private consumption but not more than what forecasts had assumed. The level of investing is slightly higher than expected and export has been more successful than predicted.”
Magnússon added that it now looks as if the recession in GDP this year will be seven percent, while earlier forecasts, undertaken by the Icelandic Ministry of Finance and the International Monetary Fund, among other institutions, had expected a recession between nine and 11 percent.
“It is very pleasing news,” the minister said, pointing out that recession in GDP in the Eurozone will be around four percent this year. “Although the recession is higher here than there the difference is perhaps not as extreme as people had feared.”
More uncertainty surrounds the economic outlook for 2010—the Icelandic state is definitely facing a recession—but Magnússon is hopeful that there will not be any recession in GDP next year.
“Then there has to be growth elsewhere,” the minister explained. “People are especially looking towards investments in the private sector but increased growth in export is also a possibility.”
Magnússon also expects increased demand for domestic products and services among Icelanders, reasoning that if the exchange rate of the króna will remain low, Icelanders will automatically prefer Icelandic products over imported ones.
The minister stated that it is assumed economic growth will become measurable in 2011 and 2012, regardless of how high or low it may be.