| 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

© Copyright 2011 by Finfacts.com

Top of Page

Global Economy
Latest Headlines
IMF Fiscal Monitor: Public debt ratios in advanced countries stabilise
IMF says recovery is becoming broader; Warns of low inflation in Eurozone
Emerging market output growth slows to marginal pace in March
Russia’s credit rating outlook cut; MICEX share index falls
US and UK residents hold 74% of private shares of Russian gas giant Gazprom
Emerging market growth slows further in 2014
Global manufacturing PMI hits 34-month high in February 2014
Swiss battle to avoid another UBS tax debacle
Russia would be vulnerable to tough economic sanctions
Switzerland to back OECD tax treaty
OECD: Faster job creation unlikely to return employment rates to pre-crisis levels
Alpine tax haven fears for its survival
Vienna world’s best city for expatriates; Dublin at 34 in list of 223 cities
Fund managers fear China hard landing; Optimism towards Europe at new highs
OECD says outlook for most advanced economies is improving
Capex spending by global companies forecast to fall in 2014
Growth engines struggle in emerging economies
Economic convergence is a myth in Europe and in emerging economies
Investors start 2014 more optimistic about global growth prospects
Davos 2014: Richest 85 people worth as much as 3.5bn poorest; Few poor countries by 2035
IMF projects global growth at 3.7% in 2014, rising to 3.9% in 2015
Davos 2014: World Economic Forum to cost $40,000 average per attendee
Stockbuilding main driver of OECD GDP growth in the third quarter of 2013
World Bank warns West's central banks not to imperil emerging market capital flows
Worldwide productivity growth weakened for the third straight year in 2013
Growth set to improve in most large economies in first half of 2014
In a crowded market, Swiss cheesemakers return to basics
Half world’s countries could depend on resource sector for growth in 20 years
Sub-Saharan Africa remains second-fastest-growing region in the world
Emerging markets growth slowed at the end of 2013
Global shares rose 20% in 2013; Nikkei best in 41 years, Dow in 18
Commodity prices down in 2013; Gold plunges; US dollar and euro rise
Corporate tax reform and the biggest tech tax havens
Tax: OECD seeks inspiration from FATCA model
IEA raises forecast for 2013 and 2014 global oil demand
Composite leading indicators suggest improving economic outlook in major economies
First global trade deal in decades to reduce trading costs
Emerging market growth strengthens in November
Global trade talks collapse in Geneva
OECD health spending falls in some countries; Ireland in low usage of generic drugs