New Economic Forecast: Iceland Has Hit Rock Bottom Skip to content

New Economic Forecast: Iceland Has Hit Rock Bottom

The Icelandic Confederation of Labor (ASÍ) predicts that Iceland has hit rock bottom and that a slow economic recovery lies ahead, according to a new economic forecast for 2011-2013.

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The situation on the employment market will continue to be difficult but should also slowly recover; according to the forecast, Iceland will see an unemployment rate of 5.2 percent at the end of 2013, visir.is reports.

The forecast also says that the government’s actions to support indebted homeowners will reduce the debt load to some extent, although a high unemployment rate, high debts and high taxation will limit the growth of homeowners’ disposable income and consumption in the coming months.

In spite of an extensive trade surplus, the exchange rate of the Icelandic króna will remain weak, according to the forecast. The króna is expected to appreciate by ten percent and reach 195 points on the exchange rate index by the end of 2013.

The inflation is expected to remain moderate, between 2.2 and 3.0 percent and fluctuate slightly around the Central Bank target inflation.

After a two-year recession, ASÍ’s analysis department believes that gross domestic product will increase by 2.5 percent this year. In 2012 and 2013 the GDP is expected to grow by approximately two percent.

Meanwhile, the unemployment rate in Iceland, 8.5 percent, is higher than in any of the other Nordic countries, according to recent numbers from OECD, which has never happened before as Gissur Pétursson, head of the Directorate of Labor, told visir.is.

At the same time, the unemployment rate is 8.0 percent in Finland, 7.9 percent in Sweden, 7.7 percent in Denmark but only 3.3 percent in Norway.

Click here to read more about unemployment in Iceland.

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