S&P lifts Iceland outlook amid stabilising economy

Icelandic GDP will grow by 2.6 percent this year and 2.4 percent in 2012, according to new Statistics Iceland figures.

Next year’s growth figure has been scaled down since the last report was published in the summer. Then 3.1 percent growth was predicted for next year. Growth will be attributable to increased private consumption and investment.

Public consumption is set to go down by 1.3 percent next year and start building again from 2014, RÚV reports.

Inflation was higher than predicted early this year and wages increased more than had been expected, according to Statistics Iceland. Despite that, the rate of inflation has levelled off in the second half of the year and it is now believed the average annual inflation rate in 2011 and 2012 will be four percent and back down to the Central Bank of Iceland 2.5 percent benchmark thereafter.

In closely related news, Standard & Poor’s Ratings Services has raised its outlook on the country to ‘stable’ from ‘negative’. According to S&P the move comes because of improved Icelandic economic fundamentals and growth expectations.

S&P also said it will consider upping Iceland’s ratings if it is able to attract further foreign investment, helping to boost growth potential and reduce external vulnerabilities.

For now the ratings company reconfirmed Iceland’s BBB- rating; which is one step into investment grade.