2009 sees 6.5% decline in GDP on plunging domestic expenditure

Iceland gross domestic product (GDP) fell back by 6.5% in real terms in 2009, a record according to Statistics Iceland. The sharp decline in GDP last year was largely due to a 20.1-percent plunge in domestic expenditure

By News Wires (text)

AFP - The crisis-stricken Icelandic economy shrank by a record 6.5 percent in 2009, having grown by 1.0 percent in 2008 and 6.0 percent in 2007, official data showed on Friday.

"The present figures show that gross domestic product (GDP) decreased by 6.5 percent in real terms, a record in the Icelandic national accounts," Statistics Iceland said in a statement citing provisional figures.

The sharp decline in GDP last year was largely due to a 20.1-percent plunge in domestic expenditure, with household consumption dropping 14.6 percent and government consumption dwindling three percent, as Iceland's fixed capital formation dropped 49.9 percent, the national statistics agency said.

On the up side, exports had grown 6.2 percent as imports fell 24 percent.

"This resulted in a considerable improvement in the balance of goods and services, from a deficit of 42 billion kronur (241 million euros, 328 million dollars) in 2008 to a surplus of 120 billion kronur in 2009," it said.

Iceland's once-booming financial sector ground to a halt in October 2008 when the country's major banks collapsed after borrowing beyond their means to fund ambitious investments abroad -- their liabilities were once worth 11 times Iceland's total GDP.