Pay rises will have “inflationary effect”

Icelandic Minister for Finance and Economic Affairs, Bjarni Benediktsson.

Icelandic Minister for Finance and Economic Affairs, Bjarni Benediktsson. Photo: Ómar Óskarsson

The scale of the salary increases agreed upon in recent collective wage negotiation will have some inflationary effect, admits Icelandic Minister for Finance and Economic Affairs, Bjarni Benediktsson.

The effect on inflation should, however, be “significantly less acute […] than we have been hearing and fearing in recent months.” Benediktsson was responding to a parliamentary question from Guðmundur Steingrímsson MP, leader of the Bright Future party (‘Björt framtíð’).

Benediktsson further set out how the government’s current raft of tax and customs cuts will bring business back to Iceland and complements the work conducted on pay negotiations.

If the current pay disputes are taken out of the equation, the Icelandic economy can be seen to be enjoying its longest period of uninterrupted growth in recent times. “Growth in Iceland outstrips that of most other countries,” claims Benediktsson. “Maybe the major question now is how well we deal with inflation.”

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