It fell from an unsustainable peak, of course, but the drop was spectacular nonetheless. BIS central bankers’ speeches  1  Where are we now, almost five years later? First, there is hardly any talk of a potential sovereign default any more: the public sector has a primary surplus, the overall deficit is estimated to have been around 2% of GDP last year, government debt as a share of GDP is on a downward trajectory, and Iceland has investment-grade ratings from all three major rating agencies. Second, we are far advanced in rebuilding a domestically oriented financial sector. The new domestic banks, which were built on the ashes of the three failing cross-border banks, are profitable, well capitalised, liquid, and with nonperforming loan ratios that, although still high due the crisis, are falling to normal levels as private sector debt restructuring progresses and the economy recovers. Third, the economy has indeed recovered, as can been seen on Figure 1a. The economy has been growing since the second quarter of 2010, and unemployment has fallen from a peak of over 9% to around 5½%. And as Figure 1b shows, this year Iceland is projected to be among the world’s five fastest-growing advanced economies, with growth estimated at 2.1%, although that is due in part to the recent slowdown in many other advanced countries.
Let me conclude by saying that Iceland has made great strides since the autumn of 2008. The next major task is to re-integrate Iceland financially into the global economy, but hopefully in a safer way this time. Thank you very much. BIS central bankers’ speeches  9