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UPDATE 1-Iceland Q3 GDP tumbles as crisis weighs
December 7, 2009 / 9:25 AM / 8 years ago

UPDATE 1-Iceland Q3 GDP tumbles as crisis weighs

* Iceland GDP shrinks 7.2 pct yr/yr in Q3

* Economy contracts 5.7 pct in Q3 vs Q2

* Q2 GDP data revised to show smaller fall

(Adds detail, background)

STOCKHOLM, Dec 7 (Reuters) - Iceland’s gross domestic product (GDP) shrank 5.7 percent in the third quarter from the second for an annual contraction of 7.2 percent as the island’s financial meltdown pummelled the economy, data showed on Monday.

The North Atlantic island nation was plunged into its worst ever economic crisis last year as its main banks, heavily indebted after years of overseas expansion, all collapsed.

The fall of Kaupthing, Landsbanki and Glitnir also laid low the Icelandic currency and forced the government to turn to the International Monetary Fund (IMF) and its European neighbours for billions of dollars worth of aid to ride out the storm.

The financial meltdown has also laid waste the broader economy, triggering bankruptcies and sending the jobless rate, virtually zero before the crisis, surging toward double digits.

While economies across the world move toward recovery on the back of massive stimulus measures rolled out by governments and central banks, Iceland’s economy is expected to contract further next year, the OECD forecast last month. [ID:nLI434859]

Iceland’s government said in October the economy would contract 8.4 percent this year as the effects of last year’s economic meltdown linger, with growth not returning until 2011.

The Statistics Office said second quarter GDP was revised to show a 6.2 percent year-on-year contraction after an initially reported 6.5 percent fall.

On a quarterly basis, the figure was revised to a 0.4 percent contraction from the 2.0 percent decline initially reported. (Reporting by Mia Shanley and Niklas Pollard, editing by Mike Peacock)

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