Iceland Sees Deep Recession
STOCKHOLM, Jan 20 (Reuters) - Iceland's Finance Ministry on Tuesday slashed its forecast for gross domestic product (GDP) and said the crisis-hit island nation's economy was heading for a deep recession this year.
The Finance Ministry said in a statement it saw real GDP declining by 9.6 percent in 2009 and remain largely unchanged in 2010. In its October forecast it saw GDP falling 1.6 percent in 2009 and returning to growth of 1.1 percent in 2010.
"Due to the collapse (of the financial system) this past autumn the Icelandic economy is heading for a deep recession in 2009 that is forecast to reach a trough in the first half of 2010," the Finance Ministry said in a statement.
The global financial crisis hit Iceland with full force in October last year when its three main commercial banks collapsed under the weight of billions of dollars of debt accumulated over years of aggressive expansion overseas.
The financial meltdown also saw trade in the Icelandic crown collapse and forced the government to seek assistance from the International Monetary Fund as well as a number of European countries.
The Icelandic Finance Ministry said inflation this year was seen at 13.1 percent, compared to its October forecast of 5.7 percent, while next year it saw inflation coming down to 2.7 percent to put it in line with the central bank's target.
The government said it expected the current account deficit, currently at an estimated 22 percent of GDP, to reverse to a 6.1 percent surplus this year and to 5.6 percent in 2010.
Unemployment was seen rising to an average of 7.8 percent in 2009 and rise even further in 2010, to 8.6 percent.
Note: In contrast to the USA, the criminality in Iceland concentrated in the banking sector. There was no year-long recession that went unreported by the authorities. All three major banks collapsed within 24 hours. They didn't have a chance to milk bail-outs to delay the inevitable. The Icelandic depositors took to street demonstrations immediately. They did not believe the official lies that everything was Okay. Pepper-sprayed by the Police, at least they won an early general election for May 19th.
Presumably, they will have a chance to throw the corrupt officials out of elected office. The Americans lacked the time to comb the legislatures in search of culprits. So, the crooks are still there to obstruct Obama's progress.