there is a light at the end of the tunnel…
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There is a light at the end of the tunnel…
Ingunn S. ÞorsteinsdóttirEconomist
17. 04. 2012
Economic growth
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
2013F
2014F
-8
-6
-4
-2
0
2
4
6
8
10
%
Private consumption
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
2013F
2014F
-20
-15
-10
-5
0
5
10
15%
Purchasing powerindex (jan 2000 = 100)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
90
95
100
105
110
115
120
125
130
135
140
Series 1Wages Disposable income
Gross fixed capital formation
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
2013F
2014F
-60-50-40-30-20-10010203040
%
Gross fixed capital formation
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
F20
13F
2014
F-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
Business sectorResidential constructionPublic sectorGross fixed capital forma-tion
Public consumption
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
F20
13F
2914
F-4%-3%-2%-1%0%1%2%3%4%5%6%
Current account balance* % of GDP
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
2013F
2014F
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
*Current account balance excluding unpaid accrued interest due to DMBs in winding - up proceedings.
Unemployment% of labour force
19571960196319661969197219751978198119841987199019931996199920022005200820112014F
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%8.1%
5,0%
Foreign exchange rate index quarterly average
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012F
2013F
2014F
100
120
140
160
180
200
220
240
260
Increase = depreciation
Inflation 12 month inflation quarterly average
2000
2001
2002
2003
2004
2005
2006
2007
2008
20092010F2011F2012F2013F2014F
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Assumption for the wage contracts
• Increase in real wages dec. 2011 – dec. 2012
• Inflation less than 2,5% in December 2012.
• Exchange rate index 190 points by the year end 2012.
• Unemployment rate less than 5% by the year end 2013
• Investment share of GDP to 20% by year end 2013.
• The contract will be revised in December 2012
The bottom line...
• The economic recovery is fragile • It is driven by growth in private consumption and investments• Temporary measure to assist indebted households• Households and businesses are still highly indebted
• We need direct foreign investment...• strengthen the krona• Increase business investment and increase output in the
future.
• Lifting the currency control – is going to be difficult task
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