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Iceland Economy Profile 2016

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Economy - overviewIceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system. Except for a brief period during the 2008 crisis, Iceland has achieved high growth, low unemployment, and a remarkably even distribution of income. The economy depends heavily on the fishing industry, which provides 40% of merchandise export earnings, more than 12% of GDP, and employs nearly 5% 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. Since 2010, tourism has become the main pillar of Icelandic economic growth, with the number of tourists expected to reach or exceed 4.5 times the Icelandic population in 2016.

Iceland's economy has been diversifying into manufacturing and service industries in the last decade, particularly within the fields of tourism, software production, and biotechnology. In fall 2013, the Icelandic Government approved a joint application by Icelandic, Chinese, and Norwegian energy firms to conduct oil exploration off Iceland’s northeast coast, although no exploration has yet taken place. Abundant geothermal and hydropower sources have attracted substantial foreign investment in the aluminum sector, boosted economic growth, and sparked some interest from high-tech firms looking to establish data centers using cheap green energy, although the financial crisis has put several investment projects on hold.

Following the privatization of the banking sector in the early 2000s, domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign currencies. 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 6.8% in 2009, and unemployment peaked at 9.4% in February 2009. Three new banks were established to take over the domestic assets of the collapsed banks. Two of them have majority ownership by the State, which intends to re-privatize them.

Since the collapse of Iceland's financial sector, government economic priorities have included stabilizing the krona, implementing capital controls, reducing Iceland's high budget deficit, containing inflation, addressing high household debt, restructuring the financial sector, and diversifying the economy. Iceland’s financial woes prompted an initial increase in public support to join the EU and the euro zone, with accession negotiations beginning in July 2010, but negotiations were suspended under the 2013 center-right government. Most macroeconomic indicators and employment have rebounded to pre-crisis levels, driven primarily by the unprecedented growth in tourism – averaging over 20% annually – following the well publicized volcanic eruption in 2010.
GDP (purchasing power parity)$15.15 billion (2015 est.)
$14.58 billion (2014 est.)
$14.3 billion (2013 est.)
note: data are in 2015 US dollars
GDP (official exchange rate)$16.72 billion (2015 est.)
GDP - real growth rate4% (2015 est.)
2% (2014 est.)
4.4% (2013 est.)
GDP - per capita (PPP)$46,100 (2015 est.)
$44,700 (2014 est.)
$44,400 (2013 est.)
note: data are in 2015 US dollars
Gross national saving23.5% of GDP (2015 est.)
21% of GDP (2014 est.)
21.2% of GDP (2013 est.)
GDP - composition, by end usehousehold consumption: 52.1%
government consumption: 23.2%
investment in fixed capital: 18.7%
investment in inventories: 0%
exports of goods and services: 54.8%
imports of goods and services: -48.8% (2015 est.)
GDP - composition by sectoragriculture: 5.8%
industry: 20.9%
services: 73.3% (2015 est.)
Population below poverty lineNA%
note: 332,100 families (2011 est.)
Labor force190,500 (2015 est.)
Labor force - by occupationagriculture: 4.8%
industry: 22.2%
services: 73% (2008)
Unemployment rate3.8% (2015 est.)
3.6% (2014 est.)
Unemployment, youth ages 15-24total: 9.8%
male: 12.9%
female: 6.6% (2014 est.)
Household income or consumption by percentage sharelowest 10%: NA%
highest 10%: NA%
Distribution of family income - Gini index28 (2006)
25 (2005)
Budgetrevenues: $6.914 billion
expenditures: $6.885 billion (2015 est.)
Taxes and other revenues41.3% of GDP (2015 est.)
Budget surplus (+) or deficit (-)0.2% of GDP (2015 est.)
Public debt81.9% of GDP (2015 est.)
85.4% of GDP (2014 est.)
Inflation rate (consumer prices)1.6% (2015 est.)
2% (2014 est.)
Central bank discount rate5.4% (31 January 2012)
5.75% (31 December 2010)
Commercial bank prime lending rate7.4% (31 December 2015 est.)
7.74% (31 December 2014 est.)
Stock of narrow money$3.262 billion (31 December 2015 est.)
$3.213 billion (31 December 2014 est.)
Stock of broad money$8.368 billion (31 December 2014 est.)
$8.12 billion (31 December 2013 est.)
Stock of domestic credit$19.37 billion (31 December 2015 est.)
$18.36 billion (31 December 2014 est.)
Market value of publicly traded shares$2.825 billion (31 December 2012 est.)
$2.021 billion (31 December 2011 est.)
$1.996 billion (31 December 2010 est.)
Agriculture - productspotatoes, carrots, green vegetables; mutton, chicken, pork, beef, dairy products; fish
Industriestourism, fish processing; aluminum smelting, ferrosilicon production; geothermal power, hydropower, tourism
Industrial production growth rate1.5% (2015 est.)
Current Account Balance$710 million (2015 est.)
$627 million (2014 est.)
Exports$4.4 billion (2015 est.)
$4.848 billion (2014 est.)
Exports - commoditiesfish and fish products 40%, aluminum, animal products, ferrosilicon, diatomite (2010 est.)
Exports - partnersNetherlands 26.1%, Spain 11.5%, UK 11.6%, Germany 7.4%, France 5.7%, US 5.7%, Norway 4.7% (2015)
Imports$4.577 billion (2015 est.)
$4.954 billion (2014 est.)
Imports - commoditiesmachinery and equipment, petroleum products, foodstuffs, textiles
Imports - partnersNorway 10.1%, Germany 8.6%, China 7.9%, US 7.9%, Denmark 7.1%, Netherlands 5.9%, Brazil 5.8%, UK 5% (2015)
Reserves of foreign exchange and gold$5.289 billion (31 December 2015 est.)
$4.176 billion (31 December 2014 est.)
Debt - external$97.87 billion (31 December 2014 est.)
$107.5 billion (31 December 2013 est.)
Stock of direct foreign investment - at home$NA (31 December 2011 est.)
$9.2 billion (31 December 2008 est.)
Stock of direct foreign investment - abroad$NA (31 December 2011)
$8.8 billion (31 December 2008)
Exchange ratesIcelandic kronur (ISK) per US dollar -
130.1 (2015 est.)
116.77 (2014 est.)
116.77 (2013 est.)
125.08 (2012 est.)
115.95 (2011 est.)
Fiscal yearcalendar year

Source: CIA World Factbook
This page was last updated on October 8, 2016