A new OECD country survey called Iceland’s economic turnaround “remarkable”and said it had been driven by “staggering growth of tourism, prudent economic policies and a favourable external environment”.

Iceland was prone to boom and bust, as a small but open economy dependent on natural resources.

The OECD warned that overheating and inflationary pressures posed a threat to the economy and that Iceland should be ready to tighten monetary policy should inflation start to rise.

It urged Iceland to press ahead with plans to create a sovereign wealth fund but said this should be invested overseas with drawdown limited to “counteracting substantial shocks”.

The report noted that in 2011, Iceland successfully completed its IMF-supported adjustment programme and capital controls, imposed after the crisis, have now essentially been lifted.

Living standards were now higher than before the crisis.

GDP growth accelerated to 7.2% in 2016, supported by strong private demand, surging investment, booming tourism and expansionary fiscal policy, the OECD said.