Iceland emerges from recession


The Icelandic economy showed its first growth for two years in the third quarter, helped by rising household consumption, according to data released today.

Iceland's top three banks were hit hard by the global credit crisis in late 2008 after expanding rapidly across Europe and the crash triggered a deep recession and the island's gross domestic product (GDP) fell 6.8 per cent in 2009.

But, helped by an IMF-led bailout, the economy and currency have stabilised. The statistics office data showed that GDP rose a seasonally adjusted 1.2 per cent in the third quarter, the first quarter-on-quarter rise for two years.

The government has slowly been working its way through tough issues like helping insolvent households.

Iceland's prime minister said the island also expects to agree on a deal in the next few days to repay Britain and the Netherlands over the Icesave deposit scheme which failed, prompting the British and Dutch to spend €5 billion repaying local depositors.

The latest GDP data showed household final consumption rose 3.8 per cent quarter-on-quarter. Data last month showed consumer confidence rising in Iceland, with Gallup's index rising to 50.6 points from 32 points in October.

The year-on-year GDP figure still showed a contraction of 2.1 per cent on a seasonally adjusted basis, but this was much less than the revised 7.3 per cent shrinkage of the previous three months.

The second quarter figures were revised to a drop of 0.3 percent from a previous estimated 3.1 percent drop. The annual contraction was revised from a fall of 8.6 per cent.