Economy of Iceland

Marine products account for more than 60% of Iceland's total export earnings. Other important exports include aluminum, ferro-silicon, equipment and electronic machinery for fishing and fish processing, and woolen goods. Foreign trade plays an important role in the Icelandic economy. Exports and imports each account for one-third of GDP. Most of Iceland's exports go to the EU and EFTA countries, the United States, and Japan.

Iceland's relatively liberal trading policy has been strengthened by accession to the European Economic Area in 1993 and by the Uruguay Round agreement, which also brought significantly improved market access for Iceland's exports, particularly seafood products. However, the agricultural sector remains heavily subsidized and protected; some tariffs range as high as 700%.

Iceland's economy is prone to inflation but remains rather broad-based and highly export-driven. During the 1970s the oil shocks hit Iceland hard. Inflation rose to 43% in 1974 and 59% in 1980, falling to 15% in 1987 but rising to 30% in 1988. Since then, inflation has dramatically fallen, and the current government is committed to tight fiscal measures. The current unemployment rate stands at a record low 1%. Iceland's economy has experienced moderately strong GDP growth (3%) for the past 3 years. Inflation averaged merely 1.5% from 1993-94, and only 1.7% from 1994-95. Increasing economic activity is predicted again for 2003, and inflation projections for 2002 are 4%.

Iceland has few proven mineral resources, although deposits of diatomite (skeletal algae) are being developed. Abundant hydroelectric and geothermal power sources are gradually being harnessed, and in 1991 80% of the population enjoyed geothermal heating. The Búrfell hydroelectric project is the largest- single station with capacity of 270 MW. The other major hydroelectric stations are at Hrauneyjarfoss (210 MW), Sigalda (150 MW), and Blanda (150 MW). Iceland is exploring the feasibility of exporting hydroelectric energy via submarine cable to mainland Europe and also actively seeks to expand its power-intensive industries, including aluminum and ferro-silicon smelting plants. Nordurál Aluminum is a wholly owned $180 million investment by Columbia Ventures of Washington State. The plant employs over 150 people and accounted for a 1% growth rate in Iceland's 1998 GDP.

Iceland has no railroads. Organized road building began about 1900 and has greatly expanded since 1980. The current national road system connecting most of the population centers is largely in the coastal areas. Regular air and sea service connects Reykjavik with the other main urban centers. In addition, airlines schedule flights from Iceland to Europe and North America. The national airline, Icelandair, is one of the country's largest employers. Iceland became a full European Free Trade Association member in 1970 and entered into a free trade agreement with the European Community in 1973. Under the agreement on a European Economic Area, effective January 1, 1994, there is basically free cross-border movement of capital, labor, goods, and services between Iceland, Norway, and the EU countries.

GDP: purchasing power parity - $6.42 billion (1999 est.)

GDP - real growth rate: 4.5% (1999 est.)

GDP - per capita: purchasing power parity - $23,500 (1999 est.)

GDP - composition by sector:
agriculture: 15% (includes fishing 13%)
industry: 21%
services: 64% (1998 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 1.9% (1999 est.)

Labor force: 131,000 (1999)

Labor force - by occupation: manufacturing 12.9%, fishing and fish processing 11.8%, construction 10.7%, other services 59.5%, agriculture 5.1% (1999)

Unemployment rate: 2.4% (1999 est.)

Budget:
revenues: $NA
expenditures: $3 billion, including capital expenditures of $146 million (1999 est.)

Industries: fish processing; aluminum smelting, ferrosilicon[?] production, geothermal power; tourism

Industrial production growth rate: NA%

Electricity - production: 6.187 billion kWh (1998)

Electricity - production by source:
fossil fuel: 0.06%
hydro: 89.88%
nuclear: 0%
other: 10.06% (1998)

Electricity - consumption: 5.754 billion kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: potatoes, turnips; cattle, sheep; fish

Exports: $1.9 billion (f.o.b., 1998)

Exports - commodities: fish and fish products 70%, animal products, aluminum, diatomite and ferrosilicon[?]

Exports - partners: EU 65% (UK 19%, Germany 15%, France 7%, Denmark 6%), US 13%, Japan 5% (1998)

Imports: $2.4 billion (f.o.b., 1998)

Imports - commodities: machinery and equipment, petroleum products; foodstuffs, textiles

Imports - partners: EU 56% (Germany 12%, UK 10%, Norway 9%, Denmark 8%, Sweden 6%), US 11% (1998)

Debt - external: $2.6 billion (1999)

Economic aid - recipient: $NA

Currency: 1 Icelandic krona (IKr) = 100 aurar (aurar is plural; singular eyrir)

Exchange rates: Icelandic kronur (IKr) per US$1 - 72.334 (January 2000), 72.352 (1999), 70.958 (1998), 70.904 (1997), 66.500 (1996), 64.692 (1995)

Fiscal year: calendar year

Updated economic figures can be obtained regularly from the official website of the Icelandic Bureau of Statistics:

• http://www.statice.is/

See also : Iceland