Iceland GDP Increases in First Quarter Skip to content

Iceland GDP Increases in First Quarter

On June 8 Statistics Iceland announced that in real terms, seasonally adjusted GDP in the 1st quarter of 2011 increased by 2.0% from the previous quarter. This is only the second quarter since 2008 of growth in GDP. The increase seems to be entirely driven by increase in capelin fishing.

GDP change by quarter. 2008-2011. Source: Statistics Iceland

Preliminary figures indicate that household final consumption decreased by 1.6% and gross fixed capital formation decreased by 6.8%. On the other hand, government final consumption increased slightly by 0.1%. Exports decreased by 8.2% and imports by 4.1% in the 1st quarter of 2011 as compared with the 4th quarter 2010. Hence, most of the traditional components of the GDP were rather weak. The entire increase is owing to a considerable increase in inventories, total domestic final expenditure increased by 5.1%.

According to Vísbending, an economic weekly newsletter, published by the same publisher as Iceland Review, capital investment has been decreasing for five years in a row and is now at a dangerously low level. Private consumption has continued to decrease. A salary increase of 4.25% is expected to increase inflationary pressure. The Icelandic króna has getting weaker from January 2011. The Euro was 154 ISK on January 1 but is now 166 ISK. A government bill in Althingi, Iceland’s Parliament, on extending currency restrictions to four years is now pending.

Inflation is on the rise and is now 3.4%. Unemployment is 7.8%. The balance of trade was favorable for the first four months of 2011 by about 20%. Vísbending says that economy has stabilized but signs of real recovery are few.

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