A New Chapter – Iceland‘s Economic Programme
Árni Páll Árnason, Minister of Economic Affairs in Iceland, introduced an new Economic Programme on Thursday, 10 November.
The Economic Programme was commissioned by the Icelandic Government and is the first of its kind in Iceland. The Programme was authored at the Ministry of Economic Affairs, after the completion of Iceland‘s Stand-by Arrangement with the International Monetary Fund last August. The Programme will be revised twice a year – the next revision will be published in the spring of 2012. The Programme was devised in cooperation with other ministries, institutions and social partners. The first Programme is shaped by other plans and projects by the authorities which have already come into force and therefore such cooperation will be strengthened for coming revisions.
The Programme is based on a new economic growth model, focused on supply-driven sustainable growth. Economic growth in Iceland has for a long time been driven by unique large-scale and temporary projects, which have lead to overheating and instability. The lack of coordinated economic policy has further exacerbated this development and caused a homogeny of the export sector and the accumulation of foreign debt. Going forward, the aim is to increase investment and use the opportunities created by the current economic situation for a more diverse private sector, innovation and productivity. Only this way can the vicious circle of overheating and recession in recent decades be broken. Therefore, economic policy for the coming years is based on securing the competitiveness of the economy, which will lay the foundation for export-driven growth. It is vital that the financial sector supports this development, while the debt of households, businesses and the general government will be restructured to a sustainable level.
The Programme will be founded on measures in six priority areas:
- Investments will be incentivised through direct government measures and supporting the private sector.
- A sustainable fiscal policy will be ensured for the future, as well as economic stability.
- An increased emphasis on the integration of education with employment. Efforts will be made to tackle the negative effects of long-term unemployment.
- The debt restructuring of households and businesses in the wake of the collapse of the banks will be completed.
- Businesses and households shall have access to a competitive and strong financial system.
- A future monetary policy will be formed and capital controls will be eased in stages.