External goods trade has been in surplus every month since August 2008,  although the January surplus is well above the average during this period and above the average of the past 6M. The balance of trade in goods, however, fluctuates considerably MoM and needs to be viewed from a longer-term perspective. The 6M average shows that it has been fairly consistent in recent months.

For 2009, the surplus in external goods trade was at a record high, averaging ISK 7.3bn monthly and totalling ISK 87.2bn for the year. In comparison, in 2007 there was a deficit of ISK 92.1bn, primarily due to the strong economic expansion in 2007 and the high ISK, whereas currently the economy is contracting substantially and the ISK at a record low.

Sizeable surplus anticipated in 2010
A substantial surplus in external goods trade is expected this year, with minimal imports for most of the year due to continued contraction in private consumption and investment, to judge by the experience of the previous year. Terms of trade have improved considerably since H1 2009, due to major aluminium price rises and some increase in prices for seafoods. The services sector is likely to continue to enjoy the benefits of the low real ISK exchange rate. In light of the above, the Central Bank's forecast of a surplus in trade in goods and services equivalent to 9.6% of GDP appears likely to be close to the mark. This would mean an improvement over last year's surplus which we estimate as in the range of 8-9%.

Real exchange rate rises