Press release
Iceland Economic Outlook for Q1 2008
Cooler times aheadThe state of the Icelandic economy has altered since our last forecast, after the deepening of the sub-prime crisis on the international markets. The economy is more cooling down, opening up the possibility that the Central Bank of Iceland will cut interest rates sooner than previously forecast.
Highlights of the forecast:
- Economic growth in 2008 will be low due to decreasing private consumption and fewer investments. Kaupthing Research expects economic growth levels around 3.3% in 2007, 0.9% in 2008, 2.5% in 2009 and 4.6% in 2010. Growth in 2009 and 2010 will mainly be driven by a turnaround in exports, attributed to higher aluminium exports and fewer imports.
- The current account deficit is expected to drop from 26% of GDP in 2006 to 12% of GDP in 2007. Moreover, we expect the deficit will be around 10% for 2008, 8% for 2009 and 6% of GDP for 2010. Research expects the announcement of a new aluminium smelter in Helguvík and that construction will commence this year.
- The ISK will depreciate this year, according to our forecast. The average value of the trade weighted index will be 136 points in mid year 2008, although we expect it to appreciate again slightly at the end of the year.
- Inflation will fall rapidly throughout 2008. The Central Bank is expected to reach its inflation target of 2.5% in the first half of 2009, mainly due to a cool down in the real estate market.
- Research expects interest policy rate cuts this year, starting in February and reaching 9.75% at the end of this year. The lowest level will be attained in 2009, where interest rates are expected to hit 6.5%.
- Yields on Icelandic bonds are expected to decrease in 2008 and the first quarter of 2009, primarily due to lower interest rates. If our forecast is correct, the 12 month return will be relatively high.
To read the whole forcast visit: http://www.kaupthing.com/lisalib/getfile.aspx?itemid=13597
Author:
Asgeir Jonsson, head of the analysis department of Kaupthing Bank.
asgeir.jonsson@kaupthing.com
About Kaupthing Bank
Kaupthing Bank offers comprehensive commercial and investment banking services to individuals, companies and institutional investors. The Bank is a leading player in all the main areas of the Icelandic financial market, and in addition to Iceland, the Bank's key markets are Denmark and the United Kingdom. The Bank focuses on the growth and development of its international activities and aims to be one of the leading investment banks in northern Europe.
Kaupthing Bank operates in thirteen countries with its headquarters located in Reykjavík. The Bank's main subsidiaries are FIH Erhvervsbank in Denmark, Kaupthing Singer & Friedlander in the United Kingdom, Kaupthing Bank Sverige, Kaupthing Bank Luxembourg, Kaupthing Bank in Finland, Norvestia Oyj in Finland, Kaupthing New York, Kaupthing Switzerland, Kaupthing Bank Belgium and Kaupthing Bank Norge in Norway. The Bank also has activities in Isle of Man, the United Arab Emirates (Dubai) and Qatar. As of 31 December 2007 the number of full-time equivalent positions was 3,334 at Kaupthing Bank and its subsidiaries. www.kaupthing.com
This release was published on openPR.
Permanent link to this press release:
Copy
Please set a link in the press area of your homepage to this press release on openPR. openPR disclaims liability for any content contained in this release.
You can edit or delete your press release Iceland Economic Outlook for Q1 2008 here
News-ID: 38224 • Views: …
More Releases from Kaupthing Bank
Kaupthing and SPRON to initiate merger discussions
Kaupthing Bank hf. (\"Kaupthing\") and Sparisjódur Reykjavíkur of nágrennis hf. (\"SPRON\") have decided to enter negotiations on a possible merger between the companies. Negotiations are expected to be completed in approximately four weeks.
Any merger of the companies is subject to the approval of a SPRON shareholders\' meeting, the Board of Directors of Kaupthing, the Icelandic Financial Supervisory Authority, the Icelandic Competition authority and the companies\' creditors.
Further information
For further information…
Kaupthing Bank's results for the first quarter of 2008
Net earnings of ISK 18.7 billion (EUR 184 million)
* Shareholders\' net earnings of ISK 18.7 billion - ISK 20.3 billion in same period of 2007
* Annualised return on equity in Q1 of 23.7%
* Earnings per share of ISK 26.1 versus ISK 27.4 in Q1 2007
* Net interest income up by 31.2% from the same period in 2007
* Net fee and commission income down by 11.3% from the same period in…
Economic Focus - Where is the króna headed?
Kaupthing Research has issued an economic analyze for the outlook for the Icelandic Króna. The conclusion is: Good long-term outlook, but difficult short-term.
The ISK exchange rate bears the hallmarks of an overshooting that will readjust itself in the longer term.
In the short term, however, the króna faces greater uncertainty than before and the immediate direction of the krona is not necessarily up.
Near term developments will principally be determined by…
Kaupthing Bank raises equivalent of EUR 1.3 billion in long-term funding
Kaupthing Bank has concluded a series of bond private placements totalling USD 1,675 million (EUR 1.1 billion) to investors in the US and Europe. Kaupthing has also finalised a bilateral loan of EUR 195 million with a European bank. In comparison the Parent Company has only about EUR 1.1 billion of long-term redemptions for the remainder of the year and FIH has EUR 1.8 billion. The terms of the aforementioned…
More Releases for Iceland
Internoc24.HOST launching affordable Iceland Dedicated Server
Internoc24.HOST, a leading provider for international Offshore Hosting Solutions, today took another step towards
becoming one of the world's most recognized and preferred Offshore Hosting brands, launching Iceland Dedicated Server Offer within the next couple of weeks.
The new server offers in Iceland should assemble the already established offshore locations of Internoc24.HOST in Romania, Russia and the Netherlands.
Milos Slatjovic from the management team of Internoc24.Host said Iceland has been known for some…
Iceland: In from the cold
On Friday the Republic of Iceland handed in an application to join the European Union to the Swedish EU presidency. Iceland's parliament last week had backed the government's plan to begin talks to join the EU, months after a meltdown of the north Atlantic island's economy amid the global financial crisis.
LYMEC President Aloys Rigaut reacted: 'Iceland is one of Europe's oldest democracies and we can thus only welcome its EU…
Iceland - Commercial property market
After sharp increases in commercial property prices last year, the market will grow calmer next year. A cool down in the economy, high interest rates and a vast increase in supply will lead to a slowdown in activity. Growth in service sector - higher concentration of property in the Reykjavik area and both new and old core areas have been growing. There are signs of a slowdown in demand in…
Iceland: Real estate market at crossroads
Housing prices will continue to rise over the coming years. The pace of these rises, however, will slow down considerably. High interest rates, tighter access to loans and a cooling labour market are the factors that will reduce demand. Supply, on the other hand, seems to have peaked and is likely to diminish over the next years – which should help stabilise real estate prices. A turn-around is expected in…
Iceland Express adds flights
Iceland Express has today announced that it will add extra flights on the London Stansted to Kefalavik route, starting on 26. February 2008. From that date this dynamic, young airline will operate 11 flights per week on this route, an increase of two flights a week on the summer programme.
London Stansted to Reykjavik was one of two original routes the airline has flown since it commenced operations in February…
Cheap energy entices data centers to Iceland
Data centers may soon be springing up all over Iceland after a recent report by Price Waterhouse Coopers which rated Iceland as having the cheapest running costs for data storage centers compared to the US, UK and India.
The report highlighted the abundance of hydroelectric and geothermal energy in Iceland which is renewable, clean and cheap. Data centers which are built in Iceland would therefore not contribute to global warming nor…
