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Macroeconomic updates - all news

10.11.2020

Economic Outlook 2020-2023: Every storm runs out of rain

Arion Bank's new economic forecast assumes a 7.5% contraction in 2020. The economic outlook for this winter has deteriorated over the last few weeks and the contraction seems set to extend into the first quarter of next year. The economic recovery will therefore begin slowly but gather momentum in 2022 and 2023, driven by private consumption and exports. This economic forecast assumes that the impact of COVID-19 on the global economy will start to diminish significantly in the second half of next year. If this happens sooner or later than assumed, the forecast will shift accordingly.

The bleaker economic outlook for the coming winter is reflected in the unemployment rate, which is expected to continue to climb and average 8.3% next year. Nevertheless, it appears that private consumption will drop less than previously thought, as most people who keep their jobs are set to receive a real wage increase. Continued housing price increases and low interest rates also serve to buoy private consumption. Due to rising housing prices and a weaker ISK, inflation is expected to stay above the Central Bank’s 2.5% inflation target for the next year. However, inflation is quick to subside if, and when, the ISK appreciates.

Business investment is expected to contract sharply this year despite historically low interest rates. Financing costs have risen despite the cut in key interest rates and the promise of quantitative easing. This could slow down the investment recovery. It’s vital to nurture investment, especially business investment, which provides the foundation for future value creation thus ensuring a more diverse sources of revenue, both for the economy and the public sector.

Economic Outlook 2020-2023: Every storm runs out of rain

Arion Bank's economic outlook presentation - Erna Björg Sverrisdóttir, Chief economist

Economic growth - growth contributions of GDP components

 

Back
  • 10.11.2020

    Economic Outlook 2020-2023: Every storm runs out of rain

  • 17.12.2019

    Economic Outlook: Mild winter, cold spring

  • 13.09.2019

    Tourism in Iceland: Modest angle of attack

  • 03.09.2019

    Oops, they did it again: Statice revises GDP figures

  • 30.08.2019

    Wow, 1.4% GDP growth in Q2 without WOW

  • 28.08.2019

    You shall not pass any further? 25 bps rate cut and silence of the doves

  • 13.08.2019

    Economic Outlook: Bumpy, but passable

  • 02.07.2019

    Icelandic tourism fights back

  • 26.06.2019

    Governor‘s farewell: 25 bps rate cut

  • 03.06.2019

    Net IIP takes center stage in Q1

  • 31.05.2019

    The way it was: 1.7% GDP growth in Q1

  • 27.05.2019

    BoT: Sunshine and showers

  • 22.05.2019

    Lower rates and dovish tone

  • 10.05.2019

    Cloudy with a chance of hail according to Statistics Iceland

  • 05.04.2019

    Economic Outlook: Winter is here

  • 21.03.2019

    Few options but to keep rates unchanged

  • 08.03.2019

    The Special Reserve Requirement lowered to 0%

  • 04.03.2019

    A surprising CA surplus in Q4

  • 01.03.2019

    Still waiting for a soft landing: 4.9% GDP growth in 2018

  • 25.02.2019

    Deficit is coming

  • 06.02.2019

    The doves unsurprisingly win the hawks – unchanged interest rates

  • 24.01.2019

    The Icelandic Housing Market: Finally levelling off

  • 03.01.2019

    The Beat Goes On: 2018 in Review

  • 12.12.2018

    Unchanged interest rates – the króna takes center stage

  • 07.12.2018

    GDP growth in Q3: Well hello private consumption!

  • 04.12.2018

    (Almost) a record surplus

  • 07.11.2018

    Hawkish tone decorated with dove feathers

  • 31.10.2018

    Economic Outlook: Soft(ish) landing

  • 02.10.2018

    Tourism in Iceland: Soft landing or a belly flop?

  • 07.09.2018

    Staggering growth in the second quarter

  • 04.09.2018

    The surplus shrinks while the external position soars

  • 31.08.2018

    Balance of trade Q2: The surplus decreases, again

  • 29.08.2018

    Unchanged interest rates: MPC flexes muscles

  • 02.08.2018

    Economic Outlook: Summer is Fading

  • 03.07.2018

    Never Too Old to Learn - Soft Landing Ahead

  • 11.06.2018

    Strong GDP growth in Q1 not enough to change rates

  • 05.06.2018

    Current account in Q1: Small, smaller, smallest

  • 01.06.2018

    Balance of trade in Q1: The incredible shrinking surplus

  • 18.05.2018

    Similar statements, same interest rates

  • 17.05.2018

    This is why we expect the króna to depreciate

  • 11.05.2018

    Winter rates will not let it go

  • 23.04.2018

    Economic Outlook: Caution, fragile!

  • 14.03.2018

    Unchanged interest rates, unchanged reserve requirement

  • 09.03.2018

    3.6% GDP growth in 2017: No cause to change rates

  • 06.03.2018

    Honey, I shrunk the current account surplus

  • 02.03.2018

    Trade in services: False alarm?

  • 07.02.2018

    Unchanged interest rates – No hawks in sight

  • 05.02.2018

    The Icelandic Housing Market: On the mend

  • 19.01.2018

    2017 Q4: Icelanders meet expectations, tourists do not

  • 15.11.2017

    Hurdle on the path to lower interest rates

  • 14.11.2017

    Economic Outlook: Too good to be true?

  • 04.10.2017

    Unexpected interest rate cut – Iceland low interest rate country?

  • 18.09.2017

    Tourism in Iceland: Here to stay?

  • 11.09.2017

    Private consumption joined the party – 3.4% GDP growth in Q2

  • 05.09.2017

    Strong króna reduces the current account surplus

  • 23.08.2017

    Interest rates unchanged – rate cuts put on hold

  • 10.08.2017

    Economic Outlook: Soft landing ahead?

  • 18.07.2017

    Payment card turnover increases by 12.2% in June

  • 26.06.2017

    External trade in a tiny economy

  • 15.06.2017

    The Central Bank's summer gift: Interest rate cut

  • 08.06.2017

    Private consumption and external trade fuel 5% economic growth

  • 30.05.2017

    Five reasons why the Icelandic króna is too strong

  • 17.05.2017

    Rising sun brings rate cuts

  • 25.04.2017

    Summary on the Icelandic stock market, dividends and interest in the market

  • 31.03.2017

    Economic Outlook 2017-2019

  • 15.03.2017

    Unchanged interest rates – will spring bring rate cuts?

  • 13.03.2017

    Further steps taken towards capital account liberalization

  • 09.03.2017

    GDP growth 11.3% in fourth quarter of 2016

  • 08.03.2017

    Are there grounds for further strengthening of the ISK?

  • 03.03.2017

    Current account surplus 8% of GDP in 2016

  • 28.02.2017

    Inflation: Continued tug of war between exchange rate and housing prices

  • 08.02.2017

    Unchanged interest rates and inflation near target rate

  • 07.02.2017

    The Icelandic Housing Market: Still in search of equilibrium

  • 01.02.2017

    The Króna depreciates in the first month of the year

  • 01.02.2017

    Strong labor market in December and 2016

  • 12.01.2017

    New majority government formed

  • 29.12.2016

    Third quarter GDP growth in double digits

  • 29.12.2016

    Tourists reduce spending amidst appreciating króna

  • 29.12.2016

    Housing prices keep rising

  • 29.12.2016

    Allowances to foreign investment of pension funds increased

  • 09.11.2016

    The times they are a changin’ – parliamentary elections 2016

  • 01.11.2016

    Arion Research Economic Outlook 2016-2019

  • 20.09.2016

    Tourism in Iceland: Dreamland or Devil’s Island?

 

Icelandic Economic Update 2016

  • Icelandic Economic Update December 2016

  • Icelandic Economic Update November 2016

  • Icelandic Economic Update October 2016

  • Icelandic Economic Update September 2016

  • Icelandic Economic Update August 2016

  • Icelandic Economic Update July 2016

  • Icelandic Economic Update June 2016

  • Icelandic Economic Update May 2016

  • Icelandic Economic Update April 2016

  • Icelandic Economic Update February 2016

  • Icelandic Economic Update January 2016

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