On May 16, 2003, the Central Bank of Iceland published the May issue of Peningamál, a quarterly publication in Icelandic, including the Bank's quarterly inflation forecast and a macro-economic forecast. Inflation has remained slightly below the Central Bank's inflation target so far this year and was marginally higher in Q1 2003 than the Central Bank had forecast in February. The recent appreciation of the króna and low global inflation will contribute to low rate of inflation in the short term, and inflation is expected to remain below the target for most of next four quarters. Towards the end of the two year period inflation will approach the target and exceed it in the first half of 2005.
Besides the Fjardaál aluminium smelter project, included in the February forecast, the macroeconomic forecast published in this edition of Peningamál also takes into account construction activity in connection with the still somewhat uncertain Nordurál aluminium smelter expansion. These construction activities, recently announced public sector investment projects, likely increase in fishing quotas and the easing of the monetary stance in recent months will contribute to higher GDP growth this year and in 2004 than envisaged in February. However, output growth will remain below potential in 2003. In 2004 GDP growth is expected to reach 3¼%.
The English translation of Peningamál, Monetary
Bulletin,
will appear on the Bank's website, each chapter as soon as it becomes
available. Attached is a preliminary English translation of the Bulletin's
introductory chapter.
No. 6/2003
May 16, 2003
Table 1
Central Bank of
Annualized
quarterly change
Percentage
change from year ago
2003:1
2.9
1.9
2003:2
3.5
2.3
2003:3
1.1
2.4
2003:4
0.6
2.0
2004:1
2.1
1.8
2004:2
3.1
1.8
2004:3
2.6
2.1
2004:4
2.1
2.5
2005:1
2.6
2.6
2005:2
3.6
2.7
Yea-
on-year
In
the course of the year
2000
5.0
3.5
2001
6.7
9.4
2002
4.8
1.4
2003
2.2
1.9
2004
2.1
2.6