Iceland: Economy Overview

Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income.

Economy - overview:

The economy depends heavily on the fishing industry, which provides 40% of export earnings, more than 12% of GDP, and employs 7% of the work force. It remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, with new developments in software production, biotechnology, and tourism. Abundant geothermal sources have attracted substantial foreign investment in the aluminum and hydropower sectors and boosted economic growth, although the financial crisis has put several investment projects on hold. Much of Iceland's economic growth in recent years came as the result of a boom in domestic demand following the rapid expansion of the country's financial sector. Domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign-currency loans, following the privatization of the sector in the early 2000s. Worsening global financial conditions throughout 2008 resulted in a sharp depreciation of the krona vis-a-vis other major currencies. The foreign exposure of Icelandic banks, whose loans and other assets totaled more than 10 times the country's GDP, became unsustainable. Iceland's three largest banks collapsed in late 2008. The country secured over $10 billion in loans from the IMF and other countries to stabilize its currency and financial sector, and to back government guarantees for foreign deposits in Icelandic banks. GDP fell 6.3% in 2009, and unemployment rose to 8.8%. GDP growth is expected to be near zero in 2010 and unemployment likely to surpass 10%. Since the collapse of Iceland's financial sector, government economic priorities include stabilizing the krona, reducing its high budget deficit, containing inflation, restructuring the financial sector, and diversifying the economy. The collapse of the financial system initially led to a major shift in opinion in favor of joining the EU and adopting the euro, although support has dropped substantially because of concern about losing control of their fishing resources and reaction to measures taken by EU partners following the financial crisis.

GDP (purchasing power parity):

$12.2 billion (2009 est.)
country comparison to the world: 141
$13.02 billion (2008 est.)
$12.85 billion (2007 est.)
note: data are in 2009 US dollars

GDP (official exchange rate):

$11.78 billion (2009 est.)

GDP - real growth rate:

-6.3% (2009 est.)
country comparison to the world: 198
1.3% (2008 est.)
5.5% (2007 est.)

GDP - per capita (PPP):

$39,8000 (2009 est.)
country comparison to the world: 19
$42,800 (2008 est.)
$42,600 (2007 est.)
note: data are in 2009 US dollars

GDP - composition by sector:

agriculture: 5.2%
industry: 24%
services: 70.8% (2009 est.)

Labor force:

189,000 (2009 est.)
country comparison to the world: 172

Labor force - by occupation:

agriculture: 3%
industry: 19%
services: 78% (2007)

Unemployment rate:

8.8% (2009 est.)
country comparison to the world: 96
1.642% (2008 est.)
note: this figure climbed to 9.4% as of Februar 2009

Investment (gross fixed):

18.6% of GDP (2009 est.)
country comparison to the world: 113

Budget:

revenues: $3.879 billion
expenditures: $5.488 billion (2009 est.)

Inflation rate (consumer prices):

12% (2009 est.)
country comparison to the world: 200
12.7% (2008 est.)

Commercial bank prime lending rate:

NA% (31 December 2008)
country comparison to the world: 18
19.29% (31 September 2007)

Stock of domestic credit:

$NA (31 December 2008)
$49.67 billion (31 December 2006)

Agriculture - products:

potatoes, green vegetables; mutton, dairy products; fish

Industries:

fish processing; aluminum smelting, ferrosilicon production; geothermal power, tourism

Industrial production growth rate:

-10% (2009 est.)
country comparison to the world: 149

Oil - production:

0 bbl/day (2008 est.)
country comparison to the world: 173

Natural gas - production:

0 cu m (2008 est.)
country comparison to the world: 177

Current account balance:

$-1.03 billion (2009 est.)
country comparison to the world: 129
$-6.606 billion (2008 est.)

Exports:

$4.218 billion (2009 est.)
country comparison to the world: 111
$5.399 billion (2008 est.)

Exports - commodities:

fish and fish products 70%, aluminum, animal products, ferrosilicon, diatomite

Exports - partners:

Netherlands 33.8%, UK 11.7%, Germany 11.5%, US 5.8%, Japan 4.9%, Norway 4.1% (2008)

Imports:

$2.826 billion (2009 est.)
country comparison to the world: 139
$5.699 billion (2008 est.)

Imports - commodities:

machinery and equipment, petroleum products, foodstuffs, textiles

Imports - partners:

Norway 10.9%, Germany 10.4%, Sweden 9%, US 8%, Denmark 7.4%, China 6.8%, Netherlands 6%, UK 4.4%, Japan 4% (2008)

Debt - external:

$3.073 billion (2002 est.)
country comparison to the world: 118

Stock of direct foreign investment - at home:

$NA

Stock of direct foreign investment - abroad:

$NA

Exchange rates:

Icelandic kronur (ISK) per US dollar - 128.417 (2009), 85.619 (2008), 63.391 (2007), 70.195 (2006), 62.982 (2005)

Source: CIA - The World Factbook