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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Key Challenges

This chapter discusses the major challenges facing the Icelandic economy against the backdrop of the large-scale aluminium-related investment projects that are underway. Given their sheer size – including power plants they are equivalent to about 30% of one year’s GDP over 2003-08 – maintaining economic stability over the next few years will be a demanding task for macroeconomic policymakers. But there are also challenges for structural policies, notably in the labour market and environmental areas. In a longer-term perspective, the question arises as to what...


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