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OECD Economic Outlook for Iceland compared to others area 2006–2008 |
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2006 |
2007 |
2008 |
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|
GDP |
CPI |
UNP |
CAB |
GDP |
CPI |
UNP |
CAB |
GDP |
CPI |
UNP |
CAB |
|
Iceland |
2.6 |
6.7 |
2.9 |
-26.7 |
0.8 |
3.3 |
2.9 |
-19.9 |
0.8 |
2.7 |
3.8 |
-13.5 |
|
OECD |
3.2 |
2.2 |
5.9 |
-1.9 |
2.7 |
2.1 |
5.6 |
-1.5 |
2.7 |
2.0 |
5.5 |
1.5 |
|
EURO |
2.8 |
1.7 |
7.8 |
0.1 |
2.7 |
2.0 |
7.1 |
0.4 |
2.3 |
2.0 |
6.7 |
0.4 |
|
United States |
3.3 |
2.9 |
4.6 |
-6.5 |
2.1 |
2.6 |
4.6 |
-6.1 |
2.5 |
2.2 |
4.8 |
-6.2 |
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Note: GDP at market prices, CPI = Consumer Price Index, |
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UNP= Unemployment, CAB = Current Account Balance as % of GDP |
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Source: OECD Economic Outlook |
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External trade in 2006
23 May 2007
According to Statistics Iceland, the import figures fro the year 2006 are much higher than previously published. Imports are presented as cif-prices and exports at fob-prices. In 2006, total exports amounted to 242,700 million ISK fob as compared with total imports of 432,100 million ISK cif. This means that the fob/cif balance of trade in 2006 was unfavorable by 189,400 million ISK, compared with 119,500 million ISK deficit in 2005. Measured this way, there has been a deficit in external trade for the last decade. The deficit has varied in size, from approximately 1.6% of the export value in 2002 to 78.0% in 2006, mostly because of aluminum projects.
New Government
22 May 2007
The Independence Party and the Social Democrats have formed a new government. Geir Haarde will remain prime minister and Ingibjörg Sólrún Gísladóttir will be the next minister for foreign affairs. The government goes by the name of the Baugur coalition, because the company believed that the coalition of these two parties would be best for the business environment, or at least for the Baugur company.
Life expectancy 2006
21 May 2007
According to the Statistics Iceland the mean life expectancy for Icelandic women is now 83.0 years, and 79.4 years for men. Icelandic men can now expect to live longer than men in any other country. In the case of women, life expectancy is highest in Japan (84.9).
Spring time in Reykjavík!
19 May 2007
There is nothing quite like springtime in Reykjavík, or was it Paris? Nevertheless, the weather has been wonderful during the last few days. Royal De Luxe, a theatre group from Bretagne (Nantes) has been painting the town red, as we say in Icelandic, meaning it has been a lot of fun, and even Icelanders are seen in downtown Reykjavík! The trees are getting greener and leafier by the minute, the birds have returned and the sun is shining 24 hours a day. La vie est belle.
IMD WORLD COMPETITIVENESS YEARBOOK DOWNGRADE ICELAND!
18 May 2007
The IMD World Competitiveness Yearbook 2007 (WCY) analyses and ranks the ability of nations to create and maintain an environment that sustains the competitiveness of enterprises. Considered the worldwide reference point to world competitiveness, it has been published without interruption since 1989 and ranks 55 national economies using 323 criteria. The WCY is an indispensable tool for business leaders, government and academia.
In 2006, Iceland was ranked no. 4, but the WCY has downgraded Iceland to no. 7. Last year, the GDP growth was only 2.6% and the Current Account Balance was -26.5% of the GDP which might be a world record, so the downgrade by IMD is not a big surprise! However, there are plenty of things in the yearbook to consider for the new government when it is formed, especially concerning taxes and taxation.
The Government is out
17 May 2007
The government is out. The question is: will the Progressive party make a new coalition government with the Social democrats and The Left Greens, or will the Independence Party and the Social democrats form a government together? That's what the employers would want, in order to strengthen the relations to the EU. The Left Greens, for instance, turn fluorescent green at the mere mention of Europe.
Policy interest rate unchanged at 14.25%
16 May 2007
The Board of Governors of the Central Bank of Iceland has decided to leave the Bank’s policy interest rate
unchanged at 14.25%. Inflation has fallen, but more slowly than expected, and the underlying inflation is
still far above the inflation target. The inflation has been over the target since
April 2004, when it was 2.2%. The inflation reaches 4.7% for the last twelve month-period. However, the
Central Bank hopes to attain the inflation target in Q3 this year, or next year if the effect of the cut in consumption taxes in March is excluded. Although the current outlook is
broadly unchanged, the Central Bank underlines again the upside risk to the inflation profile. Recent price
developments, ongoing labour market pressures, a wide current account deficit and robust demand underline this
risk.
Flying to Iceland
15 May 2007
Icelandair has long been the only airline serving Icelanders and travellers across the sea, east and west. There was no competition, but things have been changing during the last few years. IcelandExpress has become a worthy opponent of the venerable airline, catering to travellers who want the flight without the frills. Indeed, IcelandExpress has one single class, the seating is a bit narrow, but most flights take a only a few hours. The competition has led to lower airfare prices, and if you're lucky, you can really get cheap tickets with either company. Icelandair's Saga Class, however, remains a luxury item and priced as such
Independence Party likely to lead the next government
14 May 2007
According to Kaupthing Research, the most likely option is that the current coalition government will stay in office, or the Independence party will form a new coalition government with the Social Democrats. They believe that the favorable position of the Independence party after the election will guard against any sudden changes in the current business environment and will have a short–term positive impact on the ISK. Thus, indexed yield will probably rise somewhat due to lower inflation expectations. For industrial policy, the result will mean business as usual or perhaps a slowdown in the development of aluminum smelting if Social Democrats will enter the coalition. However, it is still highly likely that one more aluminum project will take place over the period of 2007-2010 (Century Aluminium). The Kaupthing Research doesn't expect changes in industrial policy to have a large impact on the bond market.
The day after Election Day in Iceland
13 May 2007
The results are bleak, to say the least. Little change is to be expected.
The Progressive Party: 11.7%, 7 MPs
the Social Democratic Movement: 26.8%, 18 MPs
The Iceland Green Movement, 3.3% and no MPs
The Left Green Movement: 14.3%, 9 MPs
The Independence Party: 36.6%, 25 MPs
The Liberal party, 7.2%, 4 MPs
The Social Democratic Movement lost two MPs, a pity, really, since one of them is Mörður Árnason, one of the country's brighter politicians.
The Independence Party, the right-wing party in power, gained a few extra MPs. This does come as a surprise, as there have been well-known abuses of power, and one of the MPs even got charged and convicted for corruption. These are mere trifles to the citizens, it seems.
The Progressive Party, inaptly named, has all but vanished. So far, this has not affected the Party's ministers. We'll wait and see.
The Left Greens are very happy today, they are a new brand of isolationists.
Too bad the newly founded Iceland Green Movement, led by Ómar Ragnarsson, did not score. Ómar is the one that led a march of thousands to protest against the dams and aluminium plants last year. The picture shows the Party's logo displayed on a car on election day.
Election Day in Iceland
13 May 2007
What parties are there this time? Well, quite a few.
The Social Democratic Movement is a recent alliance of some of the old left parties. The Iceland Green Movement is brand new, a reaction to the abusive dam building of the last decade. The Left Green Movement is, well, a left green movement, it is rather conservative and definitely anti-European. The Progressive Party is one of the old parties, nobody seems to vote for it but it is always in charge. The Liberal party, extreme right, is a new party also. The Independence Party is the right-wing party in power.
The first figures are as follows:
The Progressive Party: 9.1%, loses 8.7%, 7 MPs
the Social Democratic Movement: 29%, loses 2%, 19 MPs
The Iceland Green Movement, got only 3.3 no MP yet
The Left Green Movement: 14.6%, gains 5.2%, 9 MPs
The Independence Party: 37.5%, gains 3.3%, 24 MPs
The Liberal party, 6.3%, loses 1.4%, 4 MPs
The government is out, obviously. The Independence Party and the Progressive Party have formed the coalition government. According to the first figures, they have only got 31 out of 63 MPs. The most likely government will be composed of the Independence Party and the Left Green Movement. When they come together, the worst from each of the two parties might dominate. They are both against the EU and have strong isolationist tendencies. Iceland would really become an island...
ELECTIONS IN ICELAND
12 May 2007
The Icelanders are voting today. A new Parliament will be elected, and hopefully a new
government as well. For the past decades, the so-called progressive party has been ubiquitous. Nobody seems to
vote it, but it still gets all the interesting ministries. That’s the party responsible for the abusive
building of dams, the aluminium plants here and there, and so on. The other majority party is the so-called
independence party. Those two parties have had their day.
The good news is that there are several
environmental or “green” parties willing to give it a try. Of course, we’ll tell you all about the
outcome in due course.
Enjoy the Eurovision song contest, too bad our national Erik the Red is not among the competitors tonight.
Reykjavík Arts Festival
10 May 2007
The Reykjavík Arts Festival starts today. It is usually quite a welcome break in the hard-working and overstressed islanders’ routine. This time, Royal De Luxe, a theatre
group from France, is opening the ball. All over Reykjavík, there are cars in a sorry state. One has been nailed down to the parking with a giant fork. Another has a great tree piercing its roof. The truth is that a giant king is having a fit. He throws cars like toys all over the place. The weather is lovely and it is fun to stroll around, looking at the silly cars, and at the hot spring that has erupted in a parking lot downtown. Something very strange is afoot, if you ask me.
There are plenty of things going on, exhibitions, concerts, and theatre. Goran Bregovic is coming, he is the one that writes the scores to Kusturica’s films. Should be very interesting. The Icelandic Sound Company will be in town, featuring our friend Gunnar, an extreme case of bongo
and gong fury. Another interesting musical event is Konono, a truly astonishing group from Africa.
For two weeks, Reykjavík will surely be great good fun – especially if the spell of good weather does not wear off!
