The economic situation for private homes has grown worse since the beginning of the year and it is expected to worsen next year, according to a forecast by Glitnir, one of <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Iceland’s major banks. This is reported by Morgunbladid online.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
Private consumption has grown very quickly in the last few years, driven by such factors as added spending power, the effects of rising property prices and shares, easier access to loans, a strong Icelandic krona, and general optimism. There are now indications that this growth is slowing, however. Imports of consumer goods and private vehicles, which experienced a 60 percent increase in 2005, has decreased. Consumers are also considerably more pessimistic about conditions and outlook in the economy than a few months ago.
Meanwhile, Glitnir forecasts 4.2 percent economic growth this year. This growth is driven by substantial domestic demand; however it is counteracted by the trade deficit, which will amount to nearly 17 percent of domestic production this year.