Iceland economy shows signs of recovery as exports grow

The economy of Iceland rebounded strongly in the third quarter of the year, figures from the national statistics agency showed on Friday, although inventories of fish can distort the data. The island nation's gross domestic product grew by 6.1 percent compared to output in the previous quarter when it fell 6.6 percent. Iceland's economy was shored up by exports which made an 11.8-percent spurt, the biggest increase since 2008, while imports were down 0.8 percent and investment contracted by 8.9 percent. Iceland, which is not a member of the European Union, was brought close to bankruptcy when the financial crisis broke, exposing vast over-expansion of its banking system. Although the latest figures appeared to indicate a strong recovery, the statistics office said it was difficult to compare data between quarters. "Unusually large changes in inventories of fisheries products between 1st and 2nd quarters of 2011-2013 make the seasonal adjustment between quarters more unsecure," Statistics Iceland wrote in a statement. In coming years, public expenditure is expected to rise as new investments will focus on the energy sector. The Central Bank of Iceland forecasts a slight increase in growth in 2014 at 2.6 percent but there is also an inflation risk with the rate in November at 3.7 percent -- well above the bank's 2.5 percent objective. Overall GDP growth is expected to be in the region of 2.5 to 3 percent in the coming years but will not return to pre-crisis levels until 2015, according to James Howat, an analyst at the economic research institute Capital Economics.