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Home > Country Profiles > Iceland

Country Profiles

Financial Outlook

In its August 2013 report on Iceland the IMF said that although the country is now on the path to recovery, legacy vulnerabilities are still an obstacle to growth. Iceland’s GDP growth reached a healthy 2.9% in 2011, but thereafter it slowed to 1.6% in 2012, improving slightly in 2013 to 1.9%, although inflation in 2013 was 3.7%. GDP growth for 2014 is expected to be up slightly at 2.1%, with inflation still just over 3.0%. It is worth recalling that in the aftermath of the 2008 crash, inflation in Iceland rose above 18% and the debt to GDP ratio exceeded 100%. Fiscal consolidation by the government, allied to the imposition of capital controls, has moved the primary balance from deficit to surplus and public debt is now on a declining path. The Icelandic krona has depreciated by some 40% in real terms since the onset of the crisis, but it is now stable. Iceland’s labor productivity compares well with its peers, but according to the IMF real output is still 10% below its pre-crisis peak.

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Further reading on Iceland

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