According to preliminary figures from the Central Bank of Iceland, the merchandise trade balance deteriorated dramatically in the first quarter of 1998. Compared with the first quarter of 1997, imports rose by Ikr12.8bn to Ikr43.3bn ($603m), helping to tip the merchandise trade balance Ikr14.4bn into the red. The strong rise in imports was driven by buoyant domestic demand -- a reflection of rising real disposable income, and extensive investment in the construction of an aluminium plant in the south-west of the country. This was evident in imports of industrial and capital goods, which rose from Ikr15.8bn to Ikr21.4bn, while imports of transportation goods rose by Ikr4.6bn to almost Ikr8.2bn -- with a one-off Ikr3.5bn increase in imports of aircraft accounting for most of that rise.
-- although new calculation methods may overstate the deficit
Meanwhile, the Central Bank and Statistics Iceland have cast doubt on the accuracy of recent data on Icelandic exports, which may be underestimated as a result of the recent computerisation of export accounting methods. Preliminary figures indicate that exports of merchandised goods dipped from Ikr33bn to Ikr28.9bn ($402m). The fisheries strike in February and March was the main factor behind this decline, with exports of marine products declining to Ikr20.5bn in the first quarter of the year, down from Ikr23.6bn in the same period a year earlier. However, exports of aluminium rose substantially as new production capacity came on line, from Ikr3.1bn to Ikr5bn. Despite the overall decline, exports to the EU remained almost unchanged with EU countries purchasing goods worth Ikr18.4bn from Iceland. However, Icelandic exports to South-east Asia were adversely affected by the economic crises in the region, with total exports declining from Ikr3.4bn in the first quarter of 1997 to Ikr1.9bn a year later. Exports to the United States also declined dramatically in this period, from Ikr6.3bn to Ikr3.4bn.
Foreign trade, Jan-Mar (Ikr m) 1997 1998 Exports fob 33,102 28,896 of which: marine products 23,584 20,505 aluminium & ferro-silicon 4,102 5,661 Imports cif 30,465 43,274 of which: food & drink 2,691 3,485 industrial & capital goods 15,845 21,394 transport equipment 3,646 8,195 Trade balance 2,637 -14,378 Source: Central Bank of Iceland, Economic Statistics Monthly.