Færøudvalget 2016-17
FÆU Alm.del Bilag 23
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English Summary
Assessment of Short-term Economic Trends and Special Topics
Chapt er I Short - t erm Econom ic Trends Assessm ent Aut um n 2017
The Econom ic Council and St at ist ics Faroe I slands have j oint ly est im at ed growt h in GDP in current
prices for t he years 2016 – 2018. Provisional figures for GDP for t he years 2014 – 2015 are now
available as well, t he com pilat ion of which was based on t he supply/ product ion side of t he GDP.
According t o t he m ost recent dat a, t he growt h in GDP in act ual prices for 2014 is som ewhat higher
t han est im at ed in t he previous report . On t he ot her hand, t he est im at ed growt h for t he years
2015 – 2018 is som ewhat lower t han proj ect ed last Spring. The am ended est im at es for econom ic
growt h for t he years 2016 – 2018 are based on new condit ions t hat st em from t he consequences
of a decline in t he price of oil and new est im at es regarding t he export of services. I n t he m ain,
econom ic growt h in 2017 in current prices is driven by privat e consum pt ion, public invest m ent and
export .
2014
Estimated growth of GDP in current prices
7.5%
2015
5.6%
2016
6.8%
2017
6.0%
2018
4.1%
This econom ic t rends assessm ent follows t he dem and side ( expendit ures side) of t he GDP. The
dem and for goods and services is derived from t wo sources: from dom est ic dem and for
consum pt ion and invest m ent , and foreign dem and for net export (
i.e.
export m inus im port ) .
Consum pt ion has been t he m ost st able elem ent of dom est ic dem and, while invest m ent has been
t he m ost inconst ant com ponent .
At t he beginning of t he 2008 financial crisis, t he balance of t rade was a negat ive DKK 1.517
m illion, excluding vessels. Today, t he balance of t rade has recovered t o a posit ive DKK 1.895
m illion, excluding vessels. This represent s an im provem ent of som e DKK 3.4 billion.
Econom ic indicat ors over t he last half- year clearly suggest an upward m oving business cycle t rend,
charact erized by low unem ploym ent , high em ploym ent , im m igrat ion, housing short ages in t he
cent ral region of t he count ry and econom ic growt h. The prospect is for a sur plus in t he nat ional
account s for 2017 and 2018.
Chapt er I I Analyses of Special Condit ions I m pact ing Short - t erm Econom ic Trends
I n t his report , t he Econom ic Council has explored t he condit ions present in t he const ruct ion
indust ry and t he housing m arket , and, in addit ion, t he special circum st ances relat ive t o t he
financial m anagem ent of t he m unicipalit ies.
During t he recent year, t he Faroese const ruct ion indust ry has experienced significant wage drift .
Const ruct ion com panies have so m uch work in t he pipeline t hat t hey are now engaged in a
com pet it ive bidding war t o at t ract t he m ost skilled and experienced workers. This is indicat ive of a
m aj or bot t leneck wit hin t he const ruct ion indust ry t hat im pact s t he current econom ic t rends.
The m aj or populat ion growt h observed over t he last few years has result ed in a surge in t he
Faroese populat ion in 2017 t o over 50,000 wit h a concom it ant increase in t he dem and for housing.
The dat a indicat es t hat t his populat ion growt h can m ainly be explained by t he t he upward m oving
business cycle t rend. We can never exclude t hat t his soaring econom ic t rend shift s t o a declining
t rend, such t hat net im m igrat ion swings t o net em igrat ion wit h t he consequent ial result t hat t he
populat ion of t he Faroe I slands again declines. Undoubt edly, t his net im m igrat ion is one of t he
 FÆU, Alm.del - 2016-17 - Bilag 23: Indberetning nr. 5 fra Rigsombudsmanden på Færøerne
condit ions t hat has exacerbat ed t he pressure on t he housing m arket , especially because t he
growt h in populat ion happened so quickly.
Aft er 2012, t he num ber of new- built hom es declined, while at t he sam e t im e t he num ber of
em ployees in t he const ruct ion indust ry increased. One possible explanat ion for t his dichot om y
could be t he m aj or public and privat e invest m ent proj ect s t hat occurred t hroughout t he count ry
since 2013, which were not focused on invest m ent in housing. These invest m ent proj ect s engaged
a growing num ber of carpent ers and relat ed t rades people, bot h local Faroese and foreigners.
Thus, we can st at e t hat t he subst ant ial com bined privat e and public invest m ent occurring since
2013, t o a large degree, has curt ailed hom e const ruct ion, while at t he sam e t im e accelerat ing t he
growt h in cost s associat ed wit h housing const ruct ion and renovat ion.
The const ruct ion indust ry work force can be subdivided int o t hree m ain groups, nam ely t hose who
work and reside in t he Faroe I slands, t hose who reside in t he Faroe I slands and work abroad, and
foreigners who work in t he Faroe I slands. The Econom ic Council not es t hat foreign workers
account for around 240- 300 or 12- 15% of t he nearly 2,000 wage earners in t he const ruct ion
indust ry.
Analyses of t he nat ional and m unicipal account s, grounded in dat a from t he Faroese financial
m anagem ent syst em for t he public sect or, reveals t hat t here is a need for a coordinat ed and
harm onized m anagem ent of t he ent ire public econom y. I t is especially im port ant t o ensure t hat
t he econom y of t he m unicipalit ies com es under t he spending ceiling fram ework t hat now only
applies for t he econom y of t he cent ral governm ent .
The dat a suggest s t hat fiscal policies t hat correlat e posit ively wit h t he econom ic cycles are once
again present . The Econom ic Council did not warn against t he average yearly size of t he
invest m ent expendit ures. What t he Econom ic Council did warn against was t he uneven levels of
annual invest m ent t hat follows from a fiscal policy t hat correlat es posit ively wit h t he econom ic
cycles. Such a policy reduces t he m acro- econom ic st abilit y of t he count ry by m aking t he swings in
t he econom ic t rends great er t han t hey ot herwise would be.