2005 OECD Economic Surveys: Iceland 2005

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This 2005 OECD Economic Survey of Iceland examines key economic challenges Iceland will face in coming years. In particular, it looks at the effects of planned large-scale investments in power-intensive industries. As always, the report provides a comprehensive overview of the macroeconomic situation and outlook, monetary management, and the fiscal stance. The chapter on structural policy looks at employment and environmental issues Iceland will face as a result of the large investments in power-intensive industries. The final chapter discusses the current state of product market competition in Iceland, including the legal and regulatory framework, and suggests directions for further improvement.

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Assessment and Recommendations

Iceland’s growth dynamics have vastly improved since its policies changed course in the 1990s, shifting towards financial stabilisation and market liberalisation. Economic expansion since the middle of the last decade has considerably bettered that in the OECD and in particular in other European countries. With productivity growth picking up, Iceland’s per capita income has risen faster than abroad, partly reversing its previous decline relative to an OECD benchmark, and is now, in level terms, among the highest in the area. However, while output variability has declined, it remains high, with a history of...


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