OECD Economic Surveys.

Table of contents
 Basic statistics of Iceland, 2012
 Executive summary
 Assessment and recommendations
 Fostering economic recovery
 The economy is recovering at a moderate pace
 Figure 1. The domestic demand-led recovery has moderated
 Table 1. The short-term economic outlook
 Figure 2. Output is near its trend level
 Figure 3. Inflation remains above the Central Bank of Iceland's target
 Remaining monetary policy accommodation should be withdrawn
 Figure 4. Monetary policy accommodation is being withdrawn
 Economic growth should pick up momentum next year
 Economic rebalancing. The economy is adjusting to a more sustainable balance between aggregate demand and national outputFigure 5. Iceland's large current account deficits have been eliminated
 Figure 6. The real exchange rate is below its equilibrium value
 Figure 7. Traded sectors' share of value added has expanded since the crisis while that of non-traded sectors' has shrunk
 Table 2. Iceland's net international investment position, end 2012
 Balance sheet repair is well advanced
 Figure 8. Household debt has fallen but remains high by international comparison
 Figure 9. Company debt has fallen. Figure 10. Banks are expanding lending to households but lending to companies is fallingFigure 11. The ratio of non-performing loans has fallen significantly in Iceland
 Box 1. Recommendations to support economic rebalancing
 Capital controls, monetary policy framework and financial stability
 Removing capital controls is a major policy challenge
 Figure 12. The authorities' programme for the removal of capital controls
 Inflation targeting after the capital controls have been lifted
 Figure 13. Inflation expectations are not well anchored. Prudential tools as the third pillar of macroeconomic policyBox 2. Recommendations for promoting financial stability and effective monetary policy
 Fiscal consolidation
 Figure 14. Fiscal gaps in Iceland remain significant
 Considerable fiscal consolidation has been achieved but further measures are still required
 Figure 15. Public finances are recovering from the large deterioration caused by the financial crisis
 Table 3. Much of the former government's fiscal consolidation plan has been implemented. Figure 16. The redistributive effect of the tax/transfer system has increased to near the OECD averageFigure 17. Disposable income inequality has fallen to low levels in Iceland
 Figure 18. The anchored poverty rate increased more in Iceland than in most other countries during the global financial crisis
 The proposed budget framework law would increase fiscal discipline
 Box 3. Recommendations to put public finances on a sustainable path
 Government expenditure efficiency.