Iceland Economy Profile 2009

Economy - overview

Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system, including generous housing subsidies. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income. Government economic priorities have included stabilizing the krona, reducing the current account deficit, containing inflation, restructuring the financial sector, and diversifying the economy. 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 negotiated over $10 billion in loans from the IMF and other countries to stabilize its currency and financial sector, and to guarantee foreign deposits in Icelandic banks. A protracted recession is expected in 2009 and 2010 with GDP likely to contract and unemployment likely to surpass 10%. The collapse of the financial system has led to a major shift in opinion in favor of joining the EU and adopting the euro. Previous opposition to this move stemmed from Icelanders' concern about losing control of their fishing resources. Iceland's coalition government collapsed in January 2009 following protests over growing joblessness and losses to personal savings.

GDP (purchasing power parity)

$12.71 billion (2008 est.)
$12.67 billion (2007 est.)
$12 billion (2006 est.)
note: data are in 2008 US dollars

GDP (official exchange rate)

$17.55 billion (2008 est.)

GDP - real growth rate

0.3% (2008 est.)
5.5% (2007 est.)
4.5% (2006 est.)

GDP - per capita (PPP)

$41,800 (2008 est.)
$42,000 (2007 est.)
$40,100 (2006 est.)
note: data are in 2008 US dollars

GDP - composition by sector

agriculture: 5%
industry: 25.2%
services: 69.8% (2008 est.)

Population below poverty line

NA%

Labor force

184,000 (2008 est.)

Labor force - by occupation

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

Unemployment rate

1.6% (2008 est.)
1% (2007 est.)
note: this figure climbed to 9.4% as of February 2009

Household income or consumption by percentage share

lowest 10%: NA%
highest 10%: NA%

Distribution of family income - Gini index

25 (2005)

Investment (gross fixed)

23.9% of GDP (2008 est.)

Budget

revenues: $6.657 billion
expenditures: $6.856 billion (2008 est.)

Public debt

80.9% of GDP (2008 est.)
35.9% of GDP (2004 est.)

Inflation rate (consumer prices)

12.7% (2008 est.)
5.1% (2007 est.)

Central bank discount rate

NA% (31 December 2008)
15.25% (31 December 2007)

Commercial bank prime lending rate

NA% (31 December 2008)
19.29% (31 December 2007)

Stock of money

$NA (31 December 2008)
$6.64 billion (31 December 2007)

Stock of quasi money

$15.05 billion (31 December 2006)
$NA (31 December 2007)

Stock of domestic credit

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

Industries

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

Industrial production growth rate

0% (2008 est.)

Electricity - production

11.71 billion kWh (2007 est.)

Electricity - production by source

fossil fuel: 0.1%
hydro: 82.5%
nuclear: 0%
other: 17.5% (geothermal) (2001)

Electricity - consumption

9.312 billion kWh (2006 est.)

Electricity - exports

0 kWh (2007 est.)

Electricity - imports

0 kWh (2007 est.)

Oil - production

0 bbl/day (2007 est.)

Oil - consumption

21,120 bbl/day (2007 est.)

Oil - imports

17,450 bbl/day (2005)

Oil - exports

860.8 bbl/day (2005)

Oil - proved reserves

0 bbl (1 January 2006 est.)

Natural gas - production

0 cu m (2007 est.)

Natural gas - consumption

0 cu m (2007 est.)

Natural gas - exports

0 cu m (2007 est.)

Natural gas - imports

0 cu m (2007 est.)

Natural gas - proved reserves

0 cu m (1 January 2006 est.)

Current Account Balance

-$1.782 billion (2008 est.)
-$3.178 billion (2007 est.)

Agriculture - products

potatoes, green vegetables; mutton, dairy products; fish

Exports

$5.692 billion (2008 est.)
$4.793 billion (2007 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

$5.782 billion (2008 est.)
$6.181 billion (2007 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)

Reserves of foreign exchange and gold

$2.5 billion (31 December 2008 est.)
$2.436 billion (31 December 2007 est.)

Debt - external

$3.073 billion (2002)

Stock of direct foreign investment - at home

$NA

Stock of direct foreign investment - abroad

$NA

Market value of publicly traded shares

$NA (31 December 2008)
$40.56 billion (31 December 2007)
$36.1 billion (31 December 2006)

Economic aid - donor

$6.7 million (2004)

Currency (code)

Icelandic krona (ISK)

Currency (code)

ISK

Exchange rates

Icelandic kronur (ISK) per US dollar - 85.619 (2008 est.), 63.391 (2007), 70.195 (2006), 62.982 (2005), 70.192 (2004)

Fiscal year

calendar year