Iceland heading for “deep economic slump”

“There is nothing to prevent a deep economic slump within the next five years,” says economist and former Member of Parliament Vilhjálmur Egilsson to Icelandic TV station Hringbraut. “This will probably hit us in the course of the next government.” High wage rises are creating a bubble, predicts Egilsson. “The annual rise in the wage index has been in double figures for the past six months in a row, and it looks like this trend will continue.” “Iceland is now returning to a consumption-driven economy and wage rises are outstripping what business can actually deal with,” he says in his TV interview. “We can now start counting down to the bubble bursting.” “The growth in tourism has given Iceland a certain ‘buffer’ when it comes to the economy. But there is a danger that even tourism operators will fail to cope as costs rise and a strengthening króna makes Iceland more expensive for tourists.” (



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