In a new economic forecast presented today, Íslandsbanki bank predicts a GDP growth of 5.4 percent in Iceland this year, the highest one in a decade. The bank also predicts that the current GDP growth period will be the longest period of continued economic growth per capita in more than 70 years. This period is also expected to be the longest one to include a trade surplus and among the longest periods of price stability.
The bank predicts a 4 percent GDP growth for next year. That would be the third year of GDP growth surpassing long-term economic growth, with production tension building up in the economic system. The peak of the economic expansion will be reached next year. By contrast, in 2018, economic growth is expected to slow down to 2.6 percent, due to decreased growth, both in domestic demand and export.
The bank expects that large wage increases this year, in conjunction with moderate inflation, will increase purchasing power. The unemployment rate will continue to decrease and is believed to reach 2.6 percent by 2018.