Economy of Iceland
Economy of Iceland
Due to the fact that Iceland is a small island in the middle of the North Atlantic Ocean the economy of Iceland is equally small and is therefore subject to high volatility. The icelandic krona or isk kr is the currency used in Iceland and exhcange rates vary.
Iceland has despite this seen genuine economic prosperity and the standard of living is quite high. In 2011, gross domestic product was US$12.3bn, or $38,000 per capita, based on purchasing power parity (PPP) estimates.
The fragile nature of the economy of Iceland was made clear with the economic collapse and global crises that began in 2007. The financial crisis of 2007–2010 produced a decline in GDP and employment in Iceland, although the magnitude of this decline remains to be determined.
From 2006 onwards, the economy faced problems of growing inflation and current account deficits. Partly in response, and partly as a result of earlier reforms, the financial system expanded rapidly before collapsing entirely in a sweeping financial crisis. Iceland had to obtain emergency funding from the International Monetary Fund and a range of European countries in November 2008.The Icelandic government was criticized for taking drastic measures to ensure the survival of the economy and the banking trade but a few years down the road the economy of Iceland is looking brighter all the time.
Iceland has a mixed economy with high levels of free trade and government intervention. However, government consumption is less than in other Nordic countries.
In the 1990s Iceland undertook extensive free market reforms, which initially produced strong economic growth. As a result, Iceland was rated as having one of the world's highest levels of economic freedom as well as civil freedoms. In 2007, Iceland topped the list of nations ranked by Human Development Index and was one of the most egalitarian, according to the calculation provided by the Gini coefficient.
Iceland and Trade
The economy of Iceland is highly export-driven, trade in Iceland relies of it's majour natural resorces.
Marine products account for the majority of exports. Other important exports include aluminum, ferro-silicon alloys, machinery and electronic equipment for the fishing industry, software, woollen goods.
Most of Iceland's exports go to the European Union (EU) and European Free Trade Association (EFTA) countries, the United States, and Japan.
The main imports to Iceland are machinery and equipment, petroleum products, foodstuffs and textiles. Interestingly cement is Iceland's most imported product.
Iceland's primary import partner is Germany, with 12.6%, followed by the United States, Norway, and Denmark.
Trade with Iceland in certain goods are restricted and controlled for various reasons. Most agricultural products are subject to high tariffs; the import of some products, such as uncooked meat, is greatly restricted for phyto-sanitary reasons.
Iceland's relatively liberal trading policy has been strengthened by accession to the European Economic Area in 1993 and by the Uruguay Round, 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%.