The Organisation for Economic Co-operation and Development (OECD) predicts that the rate of unemployment in Iceland will reach 9.9 percent over the next year, meaning a still bigger increase from current levels. On the other hand, the organisation predicts that inflation will drop to 2.4 percent annually in 2010, whereas current 12 month inflation June-June is at 12.2 percent according to Statistics Iceland.
The OECD also predicts a 7 percent drop in GDP this year and a further 0.8 percent next year.
The Iceland section of the OECD’s latest global economic outlook report says that Iceland’s economy can be expected to continue its contraction all year but should show signs of a recovery in the New Year. The OECD predicts that a sizeable part of the recovery will come from increased investment in large scale industrial projects, renewed domestic demand and improvement in the markets for Icelandic exports.
While the OECD report is by no means positive, Icelanders and the world have been led to expect a 10 percent economic contraction and 10 percent unemployment in 2009. Purely from that point of view, the report could be taken positively.
The organisation warns, however that delays in getting the basis of the economy running smoothly again would delay the entire recovery process.