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Private Consumption Could Exceed that of 2007

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Private Consumption Could Exceed that of 2007

Money - Icelandic Króna

Photo: Páll Kjartansson

Private consumption in Iceland this year is expected to exceed that of 2007, the year before the financial crisis, RÚV reports.

Iceland Statistics estimates GDP growth to have been 4.2 percent last year. That was thanks to increased private consumption on one hand and increased investment, partly in tourism, on the other. In an updated economic forecast, published today, GDP growth is expected to continue at 4 percent this year and 3.1 percent the next.

Private consumption increased by 4.7 percent last year, but is projected to increase by 5.2 percent this year and 4.2 percent in 2017.

If the forecast proves right, this will be the first year that private consumption exceeds that of 2007 in real terms. Consumption has increased in the past year, as have wages and employment. The rate of inflation has been low and the Icelandic króna has strengthened. Car purchases went up by almost 50 percent last year.

Marinó Melsted, project director at Iceland statistics, states that since the population of the country has grown since 2007, consumption per person is less than it was then. When asked if this is bad news or good news, Marinó replies that Iceland’s economic situation is very different from what it was before the crisis.

“Private debt is lower, national debt is considerably lower, and leading up to the financial crisis, our trade deficit was substantial, which we don’t expect now. There is more room for expansion.”

When asked if he sees any warning signs, Marino replies, “Not the way the situation is right now. But of course, private consumption could increase even more. Given the wage increases, that’s a possibility.” That could affect the trade deficit and then the situation could worsen.

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