Economy

Economy

Iceland's external indebtedness has risen sharply since the mid-1990s and is still extremely high in international context, although it has fallen from its 2009 peak. From 2003 until the banks collapsed in October 2008, the foreign assets of the Icelandic economy grew swiftly, far outpacing annual output growth, yet foreign debt grew still more rapidly.

Economic recovery

Despite years of turmoil following the bank crisis, Iceland's economy has made a significant recovery. To ensure financial stability and to curb an outflow of assets, capital controls were imposed. While in place, the capital controls have severely limited opportunities for investment and the growth of local industries in general. Lifting the capital controls has become a primary issue for the Central Bank of Iceland, without jeopardizing the country's balance of payment and stability of the general price level.

Odd as it may sound, the economic outlook is better in Iceland than in major trading partner countries. Output growth has been stronger, inflation is close to target levels, the Treasury is operating at a surplus, and there is an established surplus on external trade. In addition to this, the spread between the official ISK exchange rate and the offshore rate has narrowed.