The worst of the Icelandic kreppa (economic crisis) is potentially over already and better prospects can already be anticipated by the New Year. According to mbl.is, this is among the key points in an economists’ report published this week by the Icelandic Ministry of Finance introducing a national economic forecast for 2009-2014.
The economic forecast says that the country’s ability to adapt flexibly to new economic circumstances is strong. Real wages have decreased and the cost competitiveness of Icelandic companies is in good shape. Renewed demand from overseas will help business and support new job creation.
The forecast reiterates the importance of refinancing the banks as quickly as possible, and of lifting currency exchange controls, both in order to improve international trust in the treasury’s financial position. Households have been hit hard by the financial crisis, but 90 percent (presumably of homeowners, ed.) are still in paid employment. The report states that laws passed to help hard-hit families get over the worst of the crisis appear to be working. It is also important to loosen controls on the business environment and support investment to increase employment.
The Economy Office at the Ministry of Finance predicts that inflation in Iceland will be 10.2 percent this year and reducing quickly to 1.6 percent next year and 1.9 percent in 2011. The Office also predicts that unemployment will continue to increase to 9.6 percent next year, and will be roughly 9 percent this year before going down to 7.5 percent in 2011. These figures apparently include the potential employment created by a new aluminium smelter planned at Helguvik and the extension of the existing smelter at Straumsvik. If the projects do no go ahead, the Office expects unemployment to be 0.5 percent higher in 2010 and 1 percent higher in 2011.
The national economic forecast says that the Capital Adequacy Ratio (CAR) of the Icelandic housing stock has been around 60-70 percent in recent years but will fall to around 44 percent by the end of the year. Ministry of Finance analysts cautioned against panic at a press conference this week, saying that early indicators point to a rapidly improving economic picture in the New Year, leading to an increase in the CAR.
On the other hand, they also reiterated again the need to assist families experiencing the worst problems paying their housing costs.
The Economy Office at the Ministry of Finance predicts that inflation in Iceland will be 10.2 percent this year———
Is it the 10.2 percent referred to the whole year inflation or 10.2 percent more inflation this year counting from now?
This report is based on this key points, which at the present time dont exist, this forecast is assuming this happens:
In other words if all this things come to pass:
1.-”The forecast reiterates the importance of refinancing the banks as quickly as possible, and of lifting currency exchange controls, both in order to improve international trust in the treasury’s financial position”.
2.-”These figures apparently include the potential employment created by a new aluminium smelter planned at Helguvik and the extension of the existing smelter at Straumsvik”.
3.-”The economic forecast says that the country’s ability to adapt flexibly to new economic circumstances is strong”.
…then things will be better. But “Ministry of Finance analysts cautioned against panic at a press conference this week” things could go the other way.
Axel this “news” is nothing but a joke, this is the goberment and media trying to make news assumeing things, presenting assumptions like facts in a forecast design to decive people.
Hey, I ment Alex the postmaster.
The above data is simply guess work. (i’m no expert but:)
1. No one is fooled, no foreign investors are going to put money into the Icelandic economy just because the central bank claim things are fine as they did before. People simply don’t trust Iceland anymore.
2. Repayments will be a drag on resources for decades to come 2009-2014 is way of the mark.
3. Exchange rate is unrealistic, refinancing the banks and refloating the Krona will not be simple. What aobut the Euro? The whole thing is a mess which they need to atleast admit.
4. Loss of wage value + flexibile and well trained workers = emmigration.
5. “potential” smelters are a moronic thing to do to start with and wont employ Icelanders but mainly foreign workers.
6. “Households have been hit hard by the financial crisis, but 90 percent (presumably of homeowners, ed.) are still in paid employment.” ETC Complete rubbish admit that the country is bust and it will take along time and hard work to get out of it. No simple solution.
What a relief! Will by shampagne today to celebrate. What about fireworks? Ah! Fireworks will be on New Year – as by that time all bad things will be over!
This is the power of new Finance Minister – what you need is just to declare a state of happiness…
PS. Should we rename the MoF to the MoWT (Wishful Thinking)?
So …
If foreign demand remains strong (1st lie, today demand is not strong)
If I can control currency exchange (how?)
If we refinance banks (2nd lie, where are the money?)
Go ahead, icelanders, ahead to the hole. EB happy unemployment is only 9%, Spain is almost 20%
@Easy – All forecasts make predictions based on assumptions and this forecast even includes some alternative scenarios based on alternative assumptions. If all the assumptions are clearly stated, where’s the deceit?
@Ólafur – exactly. It paints an optimistic picture based on things happening as planned/wished but they do claim it as such.
I think they are putting too much faith in their math skills and very short term parameters. Ten people could get a job on Tuesday and will skew the numbers to appear much more positive than they really are. More games with data.
But that Icelandic positive attitude is not a bad thing. Maybe they will be wrong but trying is better than the doom and gloom attitude we get over here where things are actually better.
I guess the clowns that think that they can fool the world with intelligence came up with the ministry report. The truth is “that the main thing that is going to make a difference and fix the economy is reducing the indexed/over-inflated loans that people have”. It doesn’t make since to take on a loan you will never be able to pay-off. Either the new government does something about this or they will be gone like Hardees’s administration. Icelanders are like volcanos, mostly quiet until they erupt in a huge way!!!
Time for you boys to pay back depositors in Kaupthing Isle of Man then – pursuant to the “Parental Guarantee” given. That was a liability which should have ranked equally with any other claim in the insolvency of Kaupthing hf but it seems the Iceland govt decided that Kaupthing hf’s funds should first be used to pay back retail depositors (or is it just Icelandic depositors?) Prioritising eg retail depositors should be done with government money not money belonging to the bank. So time to step up to the plate.
There is a long lineup trying to get their money back.
It is in the best interests of the former off shore investors that the Icelanders get on their feet and start producing income once again. You will never get your money back if the Vikings have no means to even pay off their own loans much less be taxed to death paying off the bank fiasco.
Indexing…. I don’t hear enough noise about that. it is a crippling structure that must go away but not by simply pushing the krona to false levels.
Many would love to see Iceland go back to sod houses for their “crimes” but really, they can fix this much better if they can fix the domestic fallout first.
I met few acquaintances who invested some money in Icelandic funds (or similar stuff, I don’t know proper details), they have no grudge against Iceland however they’d put Gordon Brown in jail definitely….
Maybe new potential investors (unaware of the whole matter) are afraid of today’s situation.
@Ólafur:
Well clearly you need an interpreter to read:”Iceland finance ministry reports crisis past its worst”
And assumptions are to be mande on solid ground, specially if its an official report.
If I have a job that pays 10,000 per hr. and I work 10 hr. a day, so I will have 2,000,000 at the end of every month, i CAN assume that at the end of the year, I will have made 24 million, so ASSUMING that i spend 1 million every month, so based on the job I HAVE and the money i MAKE i can ASSUME that I will have 12 million in the bank after a year. Thats how you can make an assumption, but i can not ASSUME i will have a job and assume that it will pay me 10,000 per hr. and ASSUME i will work 10 hrs. per day and then assume I can save 12 billion after 1 year, thats not an ASSUMPTION that´s beeing STUPID and what is worst ASSUME that people are stupid too.
Skeptical like the rest of you about this report.
> they have no grudge against Iceland however they’d put Gordon Brown in jail definitely
Well that’s misplaced anger then. He may have made a bad situation worse for Iceland, but the Icelandic government had already presided over the collapse of two banks as well as creating a business environment that would be criminal anywhere else.
“based on the job I HAVE and the money i MAKE i can ASSUME…”
That should be “based on the job I have and the money I make, I can infer…”. You are making an inference based on some initial assumptions and, in this case, the inference is just a simple calculation. The only assumption I can see in that step is that your calculator works correctly!
@ Easy:
Excellent!
What is at the moment the average salary (before taxes) in Iceland? 400 000 ISK? Less? More?
Just to be clear ;)
To Assume is to accept something to be true without question or proof.
Therefore whatever are the “variables”, you assume something as soon as you set the variable to a define value regardless of how ludicrous it can be.
What one has to question is the realistic forecast of this values.
@Ólafur + Easy
The inference is a positive epistemological device, it doesn’t produce the veridity of the statement. The point i think Easy is making is that the based a priori on the assumed premises of having a job paying X over Y i can pay off Z this is a deductive inference. In the real empirical world as Easy points out, we can only make inductive inferences on raw data, two different inferences. And the empirical data is dubious at best.
To keep critics happy, perhaps all the input variables should have been fed into a model such that the conclusions could be presented as a set of probability distributions. That’s what many other central banks tend to do because it is far more difficult to instantiate the input variables (ie make assumptions) with confidence nowadays.
Easy,
you might find the following link interesting where the principle about assumptions and statistical chances played an important role.
http://www.luciadeb.nl/english/index.html
Some years ago a dutch nurse was sentenced to imprisonment for life and forced psychotherapy for the murder of 7 people in the hospital where she was working.
Nobody saw her do anything, but there was suspicion as some colleagues found the number of people dying during her shifts unusually high.
A statistician calculated the probability that ALL 7 had died from natural causes with the same nurse on duty. So Patient 1 dies of natural causes on a certain day AND patient 2 dies of natural causes on a specific day etcteraetcetera : it was something like 1 in 340 million.
Based on this calculation this woman was found guilty.
However, later calculations by true experts showed the chance to be much bigger, something like 1 in 9.
According to this site in defence of her:
“They’ve taken into the equation that the statistics would not be the same for all nurses; that they in fact depend on the nurses’ locations and shifts and are related to their character and experience”
Moreover, in the IC of a big hospital people have a certain chance to die isn’t it?
The fact that untrue statistics are used to convict a person that is probably innocent is called ‘statisticide’.
It depends on the industry. But in general – less.
@Ólafur:
The point I make is clear, clearly you are not very bright, the point of the matter is that this report is acctually saying “in the event that, this and this and this things are in place…” and declareing that the worst of the cris is over when in fact none of “this and this and this ” are in place. Hope you have the mental hablility to replase “this and this” with the acctuall points. Or will you say: Easy there is no mention of “this and this and this” in the report.
The average salary in Iceland is about 170,000 to 250,000 tops, talking about average. Now, many people belive they have higher salaries because they work extra hrs or extra days and they have arrownd 300,000 at the end of the month but their salary is 200-250,000 they just worked extra for that extra money, and these days extra time is rapidly desapering. Off course there are many people with higher salaries.
OK, let’s go back to personal :-)
Two in our family – base salary before taxes – 370,000 ISK (high skill in computer graphics/art)
One has 230,000 ISK (entry level in computer graphics).
Total number of family – 4, so average is 240,000 per person. Not much really after taxes. And nothing after monthly payments :-(
Just a wake up call from the boss:
http://www.newsfrettir.com/banks/central-bank-of-iceland/765-the-central-bank-of-iceland-in-trouble
Lets not forget who is in charge here, and its this or EU and they are one and the same.
Im telling you our gobermente (and I mean no matter who you put there ther is not one prepared to guide a country here) is just playing with fire and I can promise you we will get burnt up. they think you can mess arround with this people, you dont mess arround with this people, they have to make a desition, either they follow the rules or they just return the money and end up the deal, and declare national bancrupcy and start from cero, but we can not do whatever we want AND keep the money.
“clearly you are not very bright”
Clearly… LOL. Peace :-)
What icelanders need to do is simple:
– separate people deposits from failed “old” banks.
That was done.
– let the “old” banks deal with the creditors. Those banks were private. Let the creditors, foreign and local, chase the owners and ask were the money is gone.
Ahrr, some money was lent for mortgages? Fine, icelanders just like all people were doing their best to repay them. Theu can still do that no worse than the rest of the world under the current recession.
Unfortunetely, Iceland was a small country not capable to defend itself from terrorist laws imposed on them in UK. Was it an Amercian bank to go bust no one would dear to do the same.
shortly, icelandic people are very much correct saying their former *private* bankers are criminals. May be unwilling criminals but nonetheless.
Was it not for peoples deposits, savings and pensions kept in those “old” private banks the whole story could have been much shorter.
8years. Do you see the potential problem when stripping out the assets from a company before it can be dissolved?
As to whether or not the UK would have frozen the assets of a US bank that was allowing it’s own citizens unrestricted access whilst blocking UK citizens, you may be right. I suspect it would not have arisen, as the US government would have unequivocally backed any guarantee that it was obliged to. But yes, if like Iceland they didn’t, then the UK would be less likely to freeze the assets of a US bank than an Icelandic one.
If you think about it though, that’s because they’d be afraid of the economic consequences. So the decision would be made against what might otherwise reasonably be seen (by a UK citizen) as the morally correct one, as taking that decision might lead to a net negative economical effect for the UK. Not so with Iceland.
8years in Iceland – that is quite wrong. The “deposits” of Icelanders in those banks were just contractual rights againstthe banks just as the contractual rights depositors in Kaupthing Isle of Man had for HF to repay their deposits if they were lost. It is an entirely wrong and uncivilised act by Iceland to use all the HF balance of money to repay the “deposits” by giving them priority over the rest. If Iceland want to protect their own depositors they should do it with government money like other states do – not alter the rights between creditors of the banks.
KB has has managed to recover 200 b isk from KB Norway, Sweden and Finland after all debts have been cleared and most assets sold,
Glitnir has hired a firm called Kroll to investigate abnormal transfers and other things to retrieve money and property, Kroll is an expert in this field and expects to finish this in 3-6 months,
they own other company’s like Oliver Wyman,
http://www.icenews.is/index.php/2009/05/13/iceland-finance-ministry-reports-crisis-past-its-worst/comment-page-1/#comment-76923
http://www.cipfa.org.uk/pt/download/laap82.pdf
plenty of good things going on, we will see big progress made in the very near future.
EASY, 60% OF ICELANDIC WORKERS HAVE A BASIC SALARY AROUND 140.000 ISK… ONLY HIGH SKILLED TEACHERS, AND OTHER CAN GET AROUND 250.000 AFTER TAXES. MANY PEOPLE DREAM ABOUT GETTING PAID 150.000 AFTER TAXES SO THEY CAN EAT PROPPERLY AT HOME…
Interesting link, Is this really a LEFT goberment?
http://chinaworker.info/en/content/news/741/
At first glance I saw … firm called Kill :)))))
My past experience dies hard…
But to be serious – I think it would be much easier from legal point to find and get back most of stolen stuff as Icelandic crooks are not really so sophisticated ones.