Least economic growth in Iceland Skip to content

Least economic growth in Iceland

Iceland’s economy is expected to have the lowest growth among Nordic nations in 2007, according to recent report by the Nordic Economy Committee.

The report predicts that economic growth will decrease in all Nordic countries next year except Norway. Fréttabladid reports.

The report speculates that economic growth in Iceland will decrease from 4.2 percent in 2006 to one percent in 2007. Economic growth in the other Nordic countries will be around 2 to 3.6 percent.

Inflation was low in all Nordic countries in 2006, except for in Iceland, where the inflation was 7.3 percent in 2006. Norway followed with an inflation of 2.5 percent.

Tryggvi Thór Herbertsson of the Institute of Economics at the University of Iceland told Fréttabladid that the inflation only indicates that the Icelandic economic system is recovering from recent expansion and instability, but not that economic growth in Iceland will be low in 2007 as the Nordic Economy Committee predicts.

Herbertsson points out that economic growth has been much higher in Iceland than in the other Nordic countries for a long time, so, he says, this year’s inflation will not seriously affect the Icelandic economic system.

The report also says that state budgets in the Nordic countries have never had higher profits. The Norwegian government earns the most at 19.5 percent of GDP. The Icelandic state follows with 3.8 percent. Next year, the report predicts the earnings of the Icelandic state will go down to 1.5 percent of GDP.

Benedikt Thór Valsson, an economist at the Ministry of Finance in Iceland and Iceland’s representative in the Nordic Economy Committee, told Fréttabladid that with the deficit in state budgets in most European countries taken into account, 1.5 percent is not bad.

Valsson said that in the other Nordic countries there are more people in the older generations than in the younger, which causes problems as payers of pensions are fewer than receivers of pensions.

Iceland is a relatively young nation, Valsson explained, so the pension-fund system is sustainable. He concluded that the other Nordic countries run their state budgets with profits in order to solve the problem of pensions in the future.

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