Economic statistics - 01.11.1993, Page 3

ECONOMIC STATISTICS
Vol. 14. 4. November 1993
Published quarterly by the Economic Department of the
Central Bank of lceland, 150 Reykjavík, lceland.
ISSN 0256-193X
Slow growth, low inflation and improving current account:
SIGNIFICANT CUTS IN INTEREST RATES TO
BOOST A SLUGGISH ECONOMY
During the autumn the lcelandic economy has been characterised by low inflation and an
improving current account. The GDP growth, on the other hand, is low and the unemployment
rate over the last year is the highest in decades although modest in international comparison.
The latest projection for GDP growth this year is 1A percent; the inflation has subsided to 2 per
cent at an annual rate, and the current account was in balance for the first nine months of
1993. At the end of October and the beginning of November the government and the Central
Bank took measures in order to substantially lower real interest rates to improve the conditions
for investment and growth. As a result, the interest rates on long-term Treasury papers and
bank loans have fallen by close to 2 percentage points.
Economic conditions
GDP is projected to grow by 'A per cent in 1993. In
1994, however, GDP is forecast to contract by 2.6 per
cent because of further cuts in fishing quotas aimed at
preserving the fish stocks. The value of the total fish
catch in 1993 is estimated to be 314 per cent higher in
real terms than in 1992, but next year it is estimated to
decrease by 714 per cent.
Over the past years the lcelandic economy has
adjusted successfully to adverse external conditions.
This is demonstrated by a substantial improvement in
the current account balance and the falling inflation
rate. The current account showed a slight surplus, 174
m.kr., forthefirst nine months in 1993. Fortheyearas
a whole a current account deficit had been forecast of
less than 114 per cent of GDP, mainly because of lower
imports, whereas in 1992 it was 3.1 per cent and 4.7
per cent in 1991. The unemployment rate was, on
average, 4.2 per cent of the labour force during the first
two quarters of 1993. It was 3.6 per cent in October
1993 but 2.9 per cent in October 1992, and is projected
to be 5-514 per cent next year.
Exports were 2.8 per cent higher in real terms during
the first 9 months of 1993 than during the same months
GDP, national expenditure and
current account 1980 - 1994
- Change from previous year or percentage of GDP -