ICELAND HAS registered its first quarterly economic growth since the country’s bank crash two years ago as the island nation slowly recovers from deep recession.

The positive third-quarter data came as Reykjavik said it expected to announce “within days” a fresh deal with Britain and the Netherlands over repayment of nearly €4 billion lost in the failed Icesave online bank.

Resolution of the Icesave dispute would signal further progress towards clearing the wreckage from the banking crisis after two years of diplomatic wrangling over the debt.

Having become an early victim of the global financial crisis weeks after the collapse of Lehman Brothers in 2008, Iceland is hoping it can now stage an early recovery ahead of more recently crisis-hit European countries.

Gross domestic product grew by 1.2 per cent on a seasonally adjusted basis in the third quarter, compared with the previous three months, driven by increased domestic consumption.

Ingolfur Bender, analyst at Islandsbanki, cautioned that the turnround was slow and warned repercussions from the crisis continued to cast a long shadow over the economy. – Copyright The Financial Times Limited 2010