National Report Iceland RINORD June 2018 Tryggvi Jónsson, Chairman of FRV
FRV s activities and priorities 2017-2018 Annual strategy meeting set out the following priorities: Good procurement practices Official permitting Code of ethics Accredited inspection agencies PPP Young Professionals Infrastructure - State of the Nation
State of the Nation First Icelandic Report on State of the Nation FRV and SI published the first Icelandic Report on State of the Nation in October 2017 Nordic model/cooperation The first comprehensive report on infrastructure to be published in Iceland It did create informed discussions on the status of infrastructure in the Icelandic Economy During the parliament elections, every politician had the same picture
Young Professionals First Icelandic YP s meeting in November 2017 Strategy meeting March 2018: MAIN MATTERS FUTURE GOALS FUTURE PROJECTS Image Education Innovation Powerful and solid operation Strong voice Visible success Make all members active. Make strong connections and communicate information Improve good image and make young people enthusiastic for the profession Popular field of work Profession that thrives on innovation
The Icelandic Economy
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f 2019f Strong Growth but Slowing Down GDP growth is more balanced than before Rapid economic growth for the last 3 years Driven by service exports and recently consumption and investment Around 3% economic growth is forecasted for 2018-2019 The growth of tourist exports is slowing down Leading to slower growth in business investment Reduced output gap and increased unemployment GDP growth in Iceland s main trading partners is increasing 10 8 6 4 2 0-2 -4-6 -8 Gross domestic product, changes from previous year (%) f: forecast by the Central Bank of Iceland
Foundations of the Icelandic Economy Tourism becomes the fourth pillar of the economy Exports of goods and services, billion ISK 2500 Tourists and inhabitants, thousand 1400 1200 2000 1000 1500 800 600 1000 400 500 200 0 2009 2010 2011 2012 2013 2014 2015 2016 2017f 0 2010 2009 2011 2012 2013 2014 2015 2016 2017 Tourism Aluminium Sefood Other, mainly industry Tourists Inhabitants
Industry: Large Part of the Economic Recovery Fourth of all jobs created and third of the economic growth in this upturn There were over 38,000 industrial employees in 2016, or one in five of all Icelandic wage earners in the economy One in four jobs created in the economy in the current upturn have been in industry This shows that the sector has played an important role in the economic growth of recent years It is estimated that the sector has created about third of the economic growth in this upturn 40000 35000 30000 25000 20000 Employees in industry 2009 2010 2011 2012 2013 2014 2015 2016 2017
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f 2019f Slower Growth of Corporate Investment Infrastructure investment low despite much need There has been a considerable growth in corporations investment Investment in tourism, energy sector and related industries The investment level now in line with what is seen in industrialised countries A reduction in both investment in tourism and electric power industries forecast in the near future Increase in investments in residential estate taking place There is still little investment in infrastructure by the authorities despite much need 40 35 30 25 20 15 10 5 0 Investment, proportion of GDP (%) Business investment Residential construction Public investment Total inverstment f: forecast by the Central Bank of Iceland
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Engineering sector recovering The up- and downturns are evident 2500 Number of employees 60000 Total revenues million ISK, constant prices 2000 55000 1500 50000 45000 1000 40000 35000 500 30000 25000 0 20000 Number of employees Total revenues
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f 2019f No Signs of External Imbalance Net external position close to zero never been stronger There are no signs of external imbalance of the economy Indicate that the economy won t have a hard landing There has been a high surplus on the current account The reason for this is the rapid growth in tourism exports, favorable terms of trade and low external debt The trade surplus is decreasing due to less surplus from trade in goods and services 10 5 0-5 -10-15 -20-25 Current account balance, proportion of GDP (%) f: forecast by the Central Bank of Iceland
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018f 2019f Tension in the Labour Market Tension expected to decrease with slowing economic growth Current unemployment figures are among the lowest recorded, and employment participation is close to an all-time high Labour requirements of economic growth largely met with imported labour Imported labour at record level last year Unemployment has started to increase and there are signs that the increase in jobs is slowing down Tension in the labour market is expected to decrease as the growth of the economy will slow in the next two years 10 8 6 4 2 0-2 -4-6 -8 Economic growth and unemployment (%) Unemployment f: forecast by the Central Bank of Iceland GDP, YonY real change
1991 Q1 1992 Q1 1993 Q1 1994 Q1 1995 Q1 1996 Q1 1997 Q1 1998 Q1 1999 Q1 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 Rapid Real Wage Increase Purchasing power of wages rises beyond comparison Inflation has stayed under the 2.5% inflation target since early 2014 Low inflation in imports along with strengthening of the ISK has kept inflation low despite large wage increases The improbable parallel of wage increases and low inflation has resulted in unrivalled increase in purchasing power of wages Purchasing power of wages have increased by 38% in this economic upswing 110 100 90 80 70 60 50 40 Purchasing power of wages
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Labour costs in engineering activities Labour costs are spiralling and competitiveness is suffering 14 Yearly labour costs pr. employee, constant prices, ISK 100.000 Yearly labour costs pr. employee, current prices (euros) 13 90.000 12 80.000 11 70.000 10 60.000 9 50.000 8 40.000 Labour costs pr. employee Labour costs pr. employee (euros)
1.3.2001 1.7.2001 1.11.2001 1.3.2002 1.7.2002 1.11.2002 1.3.2003 1.7.2003 1.11.2003 1.3.2004 1.7.2004 1.11.2004 1.3.2005 1.7.2005 1.11.2005 1.3.2006 1.7.2006 1.11.2006 1.3.2007 1.7.2007 1.11.2007 1.3.2008 1.7.2008 1.11.2008 1.3.2009 1.7.2009 1.11.2009 1.3.2010 1.7.2010 1.11.2010 1.3.2011 1.7.2011 1.11.2011 1.3.2012 1.7.2012 1.11.2012 1.3.2013 1.7.2013 1.11.2013 1.3.2014 1.7.2014 1.11.2014 1.3.2015 1.7.2015 1.11.2015 1.3.2016 1.7.2016 1.11.2016 1.3.2017 1.7.2017 1.11.2017 Real house prices never higher Residential house prices rising faster than in most other countries 180 Real residential house prices, index 160 140 120 100 80 60 Iceland Ísland Bretland UK Írland Irland Bandaríkin USA Source: Thomson Reuters
Economic Recovery Driven by Fundamentals Growth continues but at a slower pace Economic growth slowing down but still strong GDP growth driven by exports and domestic demand The economy in a fairly good balance Labour market remains tight offset by large-scale importation of labour Volatility and high domestic cost a burden for the non sheltered industries
FRV s challenges 2018-2019 Good procurement practices Recruitment Competitive market Accredited inspection agencies Ethical guidelines International firms entering the market Infrastructure investments
Smallest nation ever to qualify for the World Cup Iceland is doing more than fine