Main findings in Danske Bank´s economic forecast for Iceland presented at VÍB open meeting

05.12.2012

Lars Christensen, at Danske Bank Research & Analysis, presented the bank's new economic forecast for Iceland at a meeting hosted by VÍB, Íslandsbanki's Wealth Management, at the Nordica Hilton hotel this morning. This is the third time that Danske Bank publishes a forecast for Iceland, one in 2006 and one in 2011.

The report projects that growth in Iceland will perform above average over the next few years and that its recovery will continue but the levels are still well below the pre-crisis level. A GDP growth of 2,2 – 2,9% is projected for the next three years. Private consumption has held up relatively well but Danske Bank assumes that it will slow somewhat in the following years, to a growth level just below 3%. Investment activity should be fairly solid too and the bank expects growth rates of about 8-9% this year and the next.

Inflation remains above the central bank´s target but Danske Bank expects inflationary pressures to have eased somewhat in 2012 and that this trend will continue. The forecast for the GDP deflator is currently 3,7% this year and 3,1% next year.

Alongside an economic recovery the labour market has also improved significantly. The year-end unemployment rate forecast is 5,8% for this year falling to 5% in 2014.

A video recording of the meeting will be available on VÍB´s website: www.vib.is

Macro Monitor Iceland (pdf)

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