Iceland Economy

Iceland Economy

According to itypeusa, Iceland  is a state of Northern Europe (sup. 102,819 km²). Capital: Reykjavík. Administrative division: regions (8). Population: 319,756 (2008 estimate). Language: Icelandic. Religion: Protestants (86.8%), Catholics (2.4%), others (10.8%). Currency unit: Icelandic krona (100 aurar). Human Development Index: 0.968 (1st place). Borders: Atlantic ocean. Member of: Council of Europe, Nordic Council, EBRD, EFTA, NATO, OCDE, UN, OSCE and WTO.


The trend of the major reliefs, oriented from W to E in the central-southern sector of the island, means that the watercourses born from the internal plateau are directed mainly towards the N or towards the SW, such as Thjórsá, the most along Icelandic rivers. The regime of the rivers, fed by rain and snow, is mostly constant, with peaks in spring; during the volcanic eruptions due to the melting of the ice, however, sudden floods can also be very impetuous. Characteristic of Icelandic rivers are the numerous waterfalls that they form as they cross the edges of the central plateaus; particularly spectacular is the Gullfoss, the “golden waterfall”, on the Hvítá river. Scattered throughout the territory there are numerous small lakes of glacial origin.


Certainly not favored by nature, with the exception of the fishiness of the seas and the conspicuous hydroelectric and geothermal potential, Iceland has compensated for the poverty of resources with a centuries-old extraordinary adaptation – one could say attachment – of man to the environment and with a admirable economic and political organization at the service of the entire community (notable is the intervention of the State in the key sectors of the economy, such as fishing and mining); the standard of living is now very high, of the Scandinavian type. However Iceland denounces all its weakness in its almost total dependence on international economic trends; in particular, the country is severely affected by the fact that it can essentially count on a only source of income – fish and its derivatives – at the mercy of price trends and international market demands, while it must resort to imports for almost all the goods, both consumer and equipment, which it needs: agriculture and industry are indeed very weak activities.

On the other hand, tourism activity is growing with the main flows of visitors from Germany, USA and Denmark. The industry of USA and Denmark. The industry of USA and Denmark. The industry of aluminum, although it still represents a small market share, is growing. Projects to increase production also concern other industrial sectors (magnesium). Despite these signs of change, the Icelandic economy is still a poorly diversified economy, whose development is dependent on the fishing industry. The consequences of this link were clearly highlighted in the period between the end of the 1980s and the beginning of the following decade, when a decrease in revenues was evident, caused by the government’s decision to introduce a quota system to regulate and limit fishing, in order to prevent an irreversible alteration of the natural reproduction rates of fish schools in Icelandic territorial waters. The simultaneous decrease in fish prices has led to a significant crisis in the sector, which, among other things, was accompanied by a weakening of the other main Icelandic exports (aluminum and ferrosilicone). Since 1994, the economy has shown signs of growth, supported, to a significant extent, by household consumption and a recovery in exports. Public finance is also in a phase of strong recovery and inflation in 2008 reached the level of 12.4%. In the same year, the GDP was 17,549 million US dollars while the GNP reached 19,029 million US dollars in 2007, with a GDP / resident ratio. in 2008 of 55,462 US dollars. These results would fully agree with the criteria established in Maastricht for participation in the Europe of the single currency, but Iceland refused to join the EU, believing that it would inevitably lose the decision-making autonomy regarding the fish quotas, which would be established. at European level. The reports of the EEA), which entered into force in January 1994, which brings together the countries of the EU and the majority of those of the EFTA (Iceland, Liechtenstein and Norway). The agreement provides for free access to EU markets for Icelandic seafood since 1997, in exchange for Iceland to allow European vessels to catch a certain quota of fish in its waters. The entry into force of the treaty thus profoundly changed the financial services management system, over which the influence of the state has traditionally been very high. Iceland was also asked to introduce criteria similar to those of EU countries into national legislation concerning financial services to allow banks or insurance companies to operate in the EEA without encountering particular difficulties. The most direct consequences of the agreement concern the increase in trade between the European Community were its main trading partners. Germany and Great Britain are so in terms of imports and exports, respectively. Other important trading partners are the United States, the Netherlands and Denmark. As for foreign direct investments, Iceland receives most of the flows from EU countries, even if, at the level of individual states, the US is the most important; the sectors most affected are those of industry and services, which are growing rapidly. In support of the economic, productive and financial system, the State amply subsidizes education and scientific research, with investments in line with the most advanced European countries.

Iceland Economy