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2009 OECD Economic Surveys: Iceland 2009

image of OECD Economic Surveys: Iceland 2009

This 2009 edition of OECD's periodic survey of Iceland's economy examines the impact of the financial crisis and makes recommendation on how it should be managed.

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Challenging times for monetary and fiscal policies

Monetary and fiscal policies face huge challenges: the banking sector has collapsed; the economy is in the midst of a deep recession; the exchange rate has plunged; capital flows have been frozen; inflation is elevated; public debt has risen; source of revenues have disappeared; social needs have increased; and the unemployment insurance fund has been nearly depleted. Against this difficult background, this chapter discusses what policy makers should do in order to restore balance in the Icelandic economy and lay out the foundations for a sustainable recovery. The key recommendations are to seek entry in the euro area and implement the fiscal consolidation measures necessary to comply with the IMF programme.

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