2006 OECD Economic Surveys: Iceland 2006

image of OECD Economic Surveys: Iceland 2006

This 2006 edition of OECD's periodic survey of Iceland's economy finds strong growth but large macroeconomic imbalances. After a general review of the macroeconomic situation, the survey examines in a more detailed way implementation of monetary policy, improving fiscal management, furthering financial liberalisation, and adapting the education system to a changing environment.

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Assessment and recommendations

Iceland’s growth performance has been impressive. Over the past decade, its real GDP has grown by 4% per annum, significantly bettering OECD growth over that period. As result, per capita GDP has recovered most of the ground lost in a preceding spell of sluggish growth, making the country the fifth-wealthiest in the OECD on that benchmark. Most of the rise in trend growth reflects productivity gains following the implementation of widespread structural reforms, which opened the economy and enhanced competition. Financial-market liberalisation and privatisation have unleashed entrepreneurial dynamism. Many companies have expanded abroad, and the country now plays a role that belies the small size of its economy. Labour markets have been increasingly opened to foreign participants, helping to reduce labour market tensions.

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