(Updates with statistics office’s previous forecast in second paragraph.)
Nov. 24 (Bloomberg) -- Iceland’s economy will grow 2.6 percent this year, more than previously estimated, driven by consumer spending and investments.
The statistics agency in Reykjavik said today in a statement the economy will expand 2.4 percent in 2012. In July, it projected growth of 2.5 percent this year.
The island, whose banks defaulted on $85 billion in 2008, is moving into the final stages of its resurrection plan as the last vestiges of crisis management are gradually removed. Iceland’s decision to impose capital controls three years ago, made together with the International Monetary Fund, was key to surviving the bleakest moments of the crisis and helped prevent an all-out run on the island’s assets, central bank Governor Mar Gudmundsson said on Nov. 21.
Iceland’s economy will grow faster than the euro-area average this year and next, the IMF estimated in September. The cost of insuring against an Icelandic default, using credit default swaps, is lower than the average for the euro area.
The stabilization of the island’s economy has allowed the central bank to press ahead with capital liberalizations that the government estimates won’t be dropped until 2013. The approach allows foreign investors looking to offload their krona holdings to transfer them to investors willing to commit long- term to the island, according to the central bank.
--Editors: Simone Meier, Jennifer M. Freedman
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