The recession into which the Icelandic economy fell following the failure of the country’s three main banks in October 2008 continues. Domestic demand has fallen sharply, and the economy is projected to continue shrinking until early 2010. Thereafter, growth is projected to return, boosted initially by the expected normalisation of financial conditions and subsequently by investment in large energy-related projects. The unemployment rate is likely to rise to around 7% by mid-2010 and edge down thereafter. The government programme will help to narrow economic imbalances, with inflation falling to about 2.5% by 2011 and the current account deficit declining to 1.5% of GDP in 2011.

Domestic demand collapsed following the failure of Iceland's three main banks in October 2008, plunging the economy into a very deep recession. The economy is projected to shrink until early-2010, when it should be buoyed up somewhat by investment in large energy-related projects.

After a long period of unbalanced growth, the Icelandic economy has entered a deep recession following the failure of its major banks. The economy is projected to shrink until early 2010 and unemployment to soar over the next two years. Following a large depreciation of the currency, inflation is projected to spike higher, though to fall back sharply once the exchange rate effects have passed through and the effects of substantial economic slack come to bear. The current account deficit should decline markedly.

The number of broadband subscribers in the OECD rose to 235 million by December 2007, up 18% from 200 million subscribers in December 2006.This growth increased broadband penetration rates to 20 subscriptions per 100 inhabitants, up from 16.9 in December 2006.

Expansionary government measures have rekindled demand and inflation pressures at a time when imbalances in the economy remain substantial. Still, tight monetary policy is expected to eventually succeed in slowing the economy, taming inflation and reducing imbalances. However, the slow and uneven adjustment process leaves the economy vulnerable to changes in foreign investor sentiment, especially in a context of fragile global financial market conditions, and has increased the risk of a harder landing of the economy.

Despite the dot.com crash of 2001, growth in broadband has been strong. Indeed, the number of broadband Internet connections in OECD countries has risen from an average of 2.9 subscribers per 100 inhabitants in 2001 to 13.6 per 100 in December 2005.