Iceland Sees Record Recession in GDP Skip to content

Iceland Sees Record Recession in GDP

The Icelandic state and municipalities were run at a deficit of more than ISK 100 billion (USD 800 million, EUR 540 million) in the first nine months of 2009. Recession in the country’s gross domestic product (GDP) has never been higher this decade.

Copyright: Icelandic Photo Agency.

Iceland’s GDP was negative by 7.2 percent from June to September 2009 compared to the same months last year. It means that the economic growth of the past two to three years has vanished in one year, RÚV reports.

In an evaluation by Íslandsbanki, which is based on information from Statistics Iceland, it says that the impact of the economic crisis is not as severe as expected; the recession in GDP is lower than what the Central Bank of Iceland had predicted.

On the bright side, export increased by 8.2 percent in the past 12 months compared to last year and tourism and other export of services increased because of the weak Icelandic króna.

However, import dropped by 25 percent during the same period because of decreasing demand and a low exchange rate.

The Icelandic state and municipalities are facing an ISK 100 billion deficit in the first nine months of 2009; in the same period last year, there was an ISK 6 billion (USD 48 million, EUR 33 million) surplus. The state’s interest expenses have more than doubled since last year.

At the beginning of October 2009, the state budget owed ISK 1,419 billion (USD 11.4 billion, EUR 7.7 billion), compared to ISK 722 billion in October 2008.

The state budget’s monetary assets are therefore negative by ISK 441 billion (USD 3.6 billion, EUR 2.4 billion), while last year they were positive by ISK 24 billion (USD 1963 million, EUR 130 million).

Economists are expecting the Icelandic economy to reach a low point at the beginning of next year and start to recover after that.

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