During the 1970s the oil shocks (1973 and 1979 energy crisis) hit Iceland hard. Inflation rose to 43% in 1974 and 59% in 1980, falling to 15% in 1987 but rising to 30% in 1988. Iceland experienced moderately strong GDP growth (3% on average) from 1995 to 2004. Growth slowed between 2000 and 2002, but the economy expanded by 4.3% in 2003 and grew by 6.2% in 2004. Growth in 2005 exceeded 6%. Inflation averaged merely 1.5% from 1993 to 1994, and only 1.7% from 1994 to 1995. Inflation over 2006 topped at 8.6%, with a rate of 6.9% as of January 2007. Standard & Poor's reduced their rating for Iceland to AA− from A+ (long term) in December 2006, following a loosening of fiscal policy by the Icelandic government ahead of the 2007 elections.Republic of Iceland Cut To FC 'A+/A-1', LC 'AA/A-1+' On Unbalanced Policy Mix; Outlook Stable. Press release No. 48, 22 December 2006. Foreign debt rose to more than five times the value of Iceland's GDP, and Iceland's Central Bank raised short-term interest rates to nearly 15% in 2007. Due to the plunging currency against the euro and dollar, in 2008 inflation was speculated to be at 20-25%.
During the 1970s the oil shocks (1973 and 1979 energy crisis) hit Iceland hard. Inflation ros,e to 43% in 1974 and 59% in 1980, falling to 15% in 1987 but rising to 30% in 1988. Iceland experienced moderately strong GDP growth (3% on average) from 1995 to 2004. Growth slowed between 2000 and 2002, but the economy expanded by 43% in 2003 and grew by 6.2% in 2004. Growth in 2005 exceeded 6%. Inflation averaged merely 1.5% from 1993 to 1994, and only 1.7% from 1994 to 1995. Inflation over 2006 toppe.d at 8.6%, with a rate of 6.9% as of January 2007. Standard & Poor's reduced their rating for Iceland to AA− from A+ (long term) in December 2006 following a loosening of fiscal policy by the Icelandic government ah.ead of the 2007 elections.Republic of Iceland Cut To FC 'A+/A-1', LC 'AA/A-1+' On Unbalanced Policy Mix; Outlook Stable. Press release No 48, 22 December 2006. Foreign debt rose to more than five times the value of Iceland's GDP, and Iceland's Central Bank raised short-term interest rates to nearly 15% in 2007. Due to the plunging currency against the euro and dollar, in 2008 inflation was speculated to be at 20-25%.