Central Bank Governor Ásgeir Jónsson spoke with Stefán Einar Stefánsson about economic issues at a meeting of Kompaní, the business group of Morgunblaðið, which took place in Hádegismóar yesterday. A record number of guests attended the meeting.
Morgunblaðið/Eyþór Árnason
Icelanders compare themselves to Scandinavians when it suits them but ignore the comparison at other times.
This was said by Central Bank Governor Ásgeir Jónsson at a meeting of Kompaní, the Morgunblaðið business club, held at the newspaper‘s headquarters in Hádegismói yesterday.
He points out that the Scandinavian countries have all chosen different paths in monetary management. The Finns have the euro, the Danes link their krona to the euro, and the Norwegians and Swedes have a floating currency and inflation target.
“All of these countries are happy with their choice. It is not the currency arrangement that is the main issue, but the economic policy. The same applies when it comes to comparing living standards in Iceland with the Nordic countries. Reference is only made to the neighboring countries if a comparison with them is considered to show that living standards here are poorer. The truth is, however, that we have been in a special category here in Iceland in terms of wage increases and purchasing power after the end of the Covid pandemic, which reflects the high economic growth in this country,” Jónsson says.
Real wages in Iceland”s trading partners
1st quarter 2018-2nd quarter 2024
Currencies have fallen considerably
Jónsson also mentions that it can be said that we have won back the production losses we suffered during the Covid pandemic. Purchasing power here has grown considerably despite inflation but has decreased elsewhere in the Nordic countries.
“This is especially true of Norway and Sweden, but the currencies of these countries have fallen considerably while economic growth has been negligible or even negative. It can be said that the Nordic countries have not yet recovered from the pandemic. Living standards in Iceland are therefore very good compared to Scandinavia, and the purchasing power of the Icelandic króna has been very high for Icelanders traveling abroad,” he says, adding that it is therefore very important for us to work to ensure stability for the future. Good living standards are never a given for us Icelanders.
The Central Bank has achieved visible success
At the meeting, he also discussed Iceland’s economic policy during the pandemic and the increases in the commodity market. He then discussed the current state of the economy and the outlook.
Jónsson says he hopes that we are fortunate enough to achieve a soft landing. Inflation is on the decline and the Central Bank has achieved very visible success in its efforts to reduce inflation, although this has of course been done by applying a very restrictive monetary policy. He also mentions that he hopes that this success can be followed up with interest rate cuts in the new year, at the same time as the national economy stabilizes.
“We have also placed enormous emphasis on maintaining stability in the country’s balance of payments, which is reflected in stability in the foreign exchange market. We have also prevented overheating in the financial system and this has been successful. This is best seen in the fact that debt ratios are very low. Household debt is decreasing as a percentage of income and GDP, and there are still few payment problems or defaults,” Jónsson says.
A powerful business club
Kompaní is the business club of Morgunblaðið and mbl.is and is intended to unite working people in Iceland. Kompaní is thus a platform for Árvakur media to provide customers with even better service, where you can listen to educational meetings and lectures, follow innovations, and learn from the experiences of others who know what it is like to run a business in Iceland. At the meeting that took place yesterday, guests enjoyed refreshments from Finnsson Bistro.