We need more knowledge of productivity growth Today, I have given you an account of how the Riksbank tries, in various ways, to assess how large resource utilisation is. One of the measures of resource utilisation that we use compares actual GDP with an estimate of potential GDP. The financial crisis has probably lowered the growth rate of potential GDP. Actual GDP is thus roughly equal to potential GDP at present, even though GDP is only slightly higher than it was before the crisis. My assessment is also that resource utilisation is largely normal. This assessment is also supported by other measures of resource utilisation that are not associated with such large problems in calculation. Resource utilisation has a positive relationship with future inflation. Resource utilisation is thus also an indicator of future inflation. It is therefore important to be able to reliably estimate the level of resource utilisation. But the financial crisis and the associated deep recession have greatly increased uncertainty in estimates of resource utilisation. Different  16  See “An indicator of resource utilisation”, Economic Commentary no. 4, 2010, Sveriges Riksbank. 17  See the article “The driving forces behind trends in the economy can be analysed using a production function” in the Monetary Policy Report of October 2010. 18  See also the article “Low unemployment – a challenge” in the Monetary Policy Report of July 2011.
Thus, the impact of the pandemic on domestic demand was less pronounced. Despite relatively successful public health measures, the large share of tourism services in Iceland’s GDP made the economy quite vulnerable to the economic consequences of global restrictions on travel and tourism services. In 2019 tourism and tourism-related services amounted to about 8% of Iceland’s GDP, a proportion second only to that of Portugal and Spain in the OECD. Reflecting the weight of tourism in exports, Iceland’s exports contracted by 31%, more than in any other OECD country, and service exports shrank by 54% in the wake of restrictive measures taken by all major trading partners. Other tourism-dependent countries such as Greece, Spain and Portugal also suffered severe export shocks. The weight of tourism and the effects of COVID on exports  In 2020, economic activity in Iceland contracted by 7.2%, compared to 4.9% on average in main trading partner countries. The difference may appear smaller than expected given the size of the shock to exports. As a small open economy, Iceland imports a large share of consumer durables, investment goods and tourism services. Therefore, a considerably larger share of shocks to aggregate demand tends to be absorbed by the external sector than in larger, more self-contained advanced economies.