Iceland's GDP shrinks sharply as the island is pummelled by crisis

ICELAND&rsquo;S gross domestic product shrank 5.7 per cent in the third quarter from the second for an annual contraction of 7.2 per cent as the island&rsquo;s financial crisis pummelled the economy, data showed yesterday.<br /><br />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.<br /><br />The fall of Kaupthing, Landsbanki and Glitnir also laid low the Icelandic currency and forced the government to turn to the International Monetary Fund and its European neighbours for billions of dollars worth of aid to ride out the storm.<br /><br />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.<br /><br />While economies across the world move toward recovery on the back of massive stimulus measures rolled out by governments and central banks, Iceland&rsquo;s economy is expected to contract further next year, the OECD forecast last month. <br /><br />Iceland&rsquo;s government said in October the economy would contract 8.4 per cent this year as the effects of last year&rsquo;s crisis lingered.<br />