| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News


Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News




Content Management by interactivetools.com.

News : Global Economy Last Updated: Jul 3, 2013 - 8:48 AM

Iceland and economy in need of some sunshine
By Michael Hennigan, Finfacts founder and editor
Jul 2, 2013 - 8:34 AM

Email this article
 Printer friendly page

Download underlying data in Excel

The number of sunshine hours in Reykjavík, Iceland's capital, was unusually low in June, at 121.7 hours, 90 hours less than the average for June over the last ten years. Reykjavík has not seen such little sunshine since 1995, visir.is reports. The economy also needs some sunshine.

Iceland’s economy is recovering at a moderate pace and is now more balanced than before the crisis, although more remains to be done in private-sector deleveraging, reducing non-performing loans and lowering external indebtedness, according to the Organisation for Economic Cooperation and Development (OECD). Economic growth should gain momentum in 2014, led by a large increase in energy-intensive investment. To increase economic growth on a lasting basis and better manage risks, capital controls need to be removed in an orderly fashion, monetary and financial stability arrangements strengthened and the government debt-to-GDP ratio reduced to more prudent levels.

Iceland's latest 5-year average real growth (%) is at -1.1%.

Growth was 1.6% in 2012 and is projected to be 1.9% this year, and in 2014 could rise to 2.6%, the OECD said in its recent biannual survey.

The economy is volatile due to Iceland‘s small size - - population is at about 320,000 people - - - and "heavy reliance on natural resources as the main source of exports" including fisheries, the OECD said.

Icelandic lenders have forgiven household debt equal to about 12% of gross domestic product since the bank failures of 2008. Through the end of 2012, the island’s lenders had written off 212.2bn krona ($1.7bn), according to the Icelandic Financial Services Association. The group estimates a further 35.3bn krona will be forgiven this year.

The OECD noted that according to Statistics Iceland, nearly half of Icelanders are having trouble making ends meet every month, despite the country's strong economic recovery since the financial crisis of 2008, when its top three banks collapsed. "Household debt has fallen significantly from the crisis peak relative to both GDP and total assets," it said.

But the decline "has not, however, translated into a large reduction in the proportion of households in financial difficulty, which has only come down from a peak of 52% in 2011 to 48% in 2012," it added.

Government debt shot up to 120% of GDP in the wake of the financial crisis. The government and the IMF agreed that bringing debt down to more prudent levels needed to be a central pillar in the economic recovery programme. Accordingly, the government embarked on a substantial, multi-year fiscal consolidation programme aimed at reducing general government gross debt (Maastricht definition, which excludes funding deficits in government employee pension schemes) to 60% of GDP.

Ásgeir Jónsson, an assistant professor of economics at the University of Iceland, says in an article on Deutsche Welle dealing with the economy and the recent general election:

[The clear winner of the elections, the Progressive party, which is traditionally the agrarian party in Iceland, rode to victory on the platform of using "vulture funds" money to write down household mortgage debt. It is a simple but winning formula. About 85% of household debt is inflation-indexed and the average homeowner has seen the principal of his loan rise in excess of 40% due to the inflationary wave that followed the collapse of the Icelandic krona (ISK) in 2008. At the same time, the asset recovery of the failed banks has actually been much better than forecasted.

The political discourse is now dominated by all kinds of feel-good policies, goals and promises to the public, many of which are mutually exclusive or not even attainable. It is for example impossible to simultaneously promise the abolition of capital controls and low inflation and higher purchasing power in the short run. Nor is it possible to maintain fixed exchange rates while simultaneously stimulating domestic demand - - if exports are lacking.]

Check out our subscription service, Finfacts Premium , at a low annual charge of €25

Related Articles
Related Articles

© Copyright 2011 by Finfacts.com

Top of Page

Global Economy
Latest Headlines
Strong Swiss franc gloom deepens for exporters
Global investors shift focus to China; EM outflows surge to $1tn in 13 months
Global oil glut will continue into 2016
Stable growth momentum in OECD area but slowing expected in China
Prices for major food commodities in July lowest since September 2009
Global manufacturing in July weakest level in two years
US, China and UK lead top 25 target countries for foreign direct investment
Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years
Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place
Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105
Western consumer groups under pressure in China and India
Developing countries facing “structural slowdown” likely to last for years
OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties
Emerging Markets Index falls to 12-month low in May as manufacturing contracts
US and world economies slowing in 2015 — OECD
Global manufacturing production rose slightly in May; Trade flows weak
GDP growth in OECD area slowed to 0.3% in the first quarter of 2015
Only one quarter of workers worldwide have stable employment contracts
Automatic Exchange of Tax Information: OECD says countries won't be able to game system
Gates Foundation loses in Swiss family's shares coup
Minimum wage levels in OECD countries
Brent oil benchmark over $68 a barrel - up almost 50% in 2015
Global growth slows and manufacturing dips to 21-month low
Family-controlled firms dominate European business
Top 10 of world’s 250 largest consumer products companies account for 30% of sales
Nine of world's 20 fastest growing economies in Africa
Globalisation maybe stalling as trade growth remains weak
Global growth prospects uneven across major economies says IMF
Emerging markets growth lowest since 2009; Global growth at 30-year average
China's economic rebalancing hitting Latin American economies
New York, London, HK & Singapore top global financial centres index; Dublin recovers
Global growth in modest expansion from low oil prices/ monetary easing says OECD
Composite leading indicators point to positive change in growth momentum in the Eurozone
Global labour market trends portend paradise for some but uncertainty for many workers
Vienna remains top of World Quality of Living Rankings in 2015; Dublin at 34
Zurich and Geneva overtake Singapore to become world's most expensive cities
HSBC Switzerland and Falciani: How it happened
Global economic power to continue shift from advanced economies
Global food price index falls in January; Cereal output set for record
Global debt has risen $57tn or 17% of world GDP since 2007