Minister of Economic Affairs Árni Páll Árnason introduced a new economic program for Iceland on Thursday. It was commissioned by the government and is the first of its kind in Iceland, the ministry stated yesterday.
The program was drawn up by the Ministry of Economic Affairs after the completion of Iceland’s stand-by arrangement with the International Monetary Fund (IMF) last August, a press release described.
The program will be revised twice a year—the next revision will be published in spring 2012. It was devised in cooperation with other ministries, institutions and social partners.
The first program 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 program 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.
The aim is to increase investment and use the opportunities created by the current economic situation for a more diverse private sector and for innovation and increased productivity.
Only this way can the vicious circle of overheating and recession in recent decades be broken, the press release states.
Therefore, economic policy for the coming years is based on securing the competitiveness of the economy, which will lay the foundations for export-driven growth.
It is considered 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 program will include measures in six priority areas:
1. Investments will be incentivized through direct government measures and supporting the private sector.
2. A sustainable fiscal policy will be ensured for the future, as well as economic stability.
3. An increased emphasis on the integration of education with employment. Efforts will be made to tackle the negative effects of long-term unemployment.
4. The debt restructuring of households and businesses in the wake of the collapse of the banks will be completed.
5. Businesses and households shall have access to a competitive and strong financial system.
6. A future monetary policy will be formed and capital controls will be eased in stages.
The full economic program can be read here.
Click here to read more about the completion of the program with the IMF.