At 0.5 Percent, Growth Is Lower Than Expected

Last week, Statistics Iceland (StatIce) reported the annual economic growth, over this year’s first three quarters, at 0.5%. The seasons have ranged from mildly positive, to begin with, to a GDP decline of 0.2% over the year’s summer months.

This low growth rate is contrary to expectations. In comparison, economic growth in 2013 was 3.5%. In July this year, StatIce predicted a total growth of 3.1% in 2014. In November, the institute still predicted growth at 2.7%. According to mbl.is, the actual growth rate puzzles economists.

Interviewed by RÚV on Tuesday, Regína Bjarnadóttir, Chair of Arion Bank’s Department of Research and Analysis, claims that consumption was surprisingly modest in the year’s third quarter. She also stated the opinion that given this low rate of growth, “there are less grounds for serious wage raises than we presumed a few months ago“ – referring to the economy at large.

Various commentators predict that the Central Bank will announce a further decrease of interest rates this coming Wednesday – the day of this quarter’s interest policy pronouncement. The current policy rate is 5.75%.

National expenditure grew by 3% in the first three quarters of 2014, compared with the same period in 2013. Imports grew twice as fast as exports, at 10.8% compared with 5.1%.