Economy of Iceland

The Economie of Iceland is one of most prosperous world, with, in 2006, an income per capita of 42.768 euros, a growth of the rough National product of 2,6%, an unemployment rate of 2,9%, an inflation with 6,7%, a budget of the State releasing a surplus. The only shade in the table is a deficit of the foreign trade.

The economy of the Iceland strongly depends on fishing and its outlets, which count for nearly 60% of its incomes to export. The health of the economy is dependant on the market rates of the products of the sea.

Importation S and Export S

The fishery products at sea count for more than 60% of exports. The other exported products are the Aluminum, other ores ferrous, equipment for fishing and the conditioning of fish, of wool clothing. The recent development of tourism, industry and the services diversifies the incomes with export. The foreign trade plays a big role in the Icelandic economy. Exports and the imports represent each one a third of the GNP. Exports of Iceland are bound for the European Union, of the countries of the European Free Trade Association (EFTA), of the the United States and the Japan.

The relatively open Icelandic policy in trade foreign, was reinforced by its admission in European economic space in 1993 and by the agreements of GATT (Uruguay round). These treaties facilitated Icelandic exports (particularly for products of the sea). However, agriculture remains largely subsidized and protected (with customs duties rising up to 700%).

Inflation

The Icelandic economy is relatively prone to inflation. During the years 1970, the oil crisis strikes Iceland hard. Inflation amounted to 43% in 1974 and 59% in 1980. It fell to 15% in 1987 but increased to 30% in 1988. In 2001, the Central bank of Iceland fixed a maximum rate of inflation of 2,5% in order to ensure a stability of the price level. However, largely influenced by the “boom” of the real estate, inflation is maintained on a level definitely higher than this objective (4% per 2005), in spite of several raisings of interest rates by the central bank during the year. The Ministry for finances provides that inflation should be practically maintained on the same level until 2009 independently of pushed with the rise of the wages making following the wage settlement occurred on November 15th, the rate of inflation is of 6,7% per 2006.

Raw materials and energy

Iceland has few raw materials: some extraction plants of Diatomite are in exploitation. This micro fossil of diatoms is required for the applications of filtration. Its exploitation is economically profitable in Iceland because the muds extracted from lakes are dried in automatic installations fed out of geothermic vapor of origin. The important potential of hydroelectric and geothermal energy is exploited more and more. In 1991,80% of the population used a system of heating based on the Géothermie.

Hydroelectric energy is exploited by many hydroelectric stoppings. Largest will be Kárahnjúkavirkjun (690 MW), in construction until 2009, in the north of the Vatnajökull. The other stoppings are Búrfell (270 MW), Hrauneyjarfoss (210 MW), Sigalda (150 MW), Banda (150 MW), and others still. Iceland considered the export of the electricity which it produces towards the continent of Europe by a underwater Câble. She also seeks to attract industries asking much energy, such as the transformation of aluminum.

Transport

The principal means of transport in Iceland are the road. The road N°1 connects the greatest centers inhabited by making the turn of the island. Minor roads serve less important cities and villages. Regular air links connect Reykjavík to the main cities. Navigation along the east coasts reserved for goods transport. It tends to being supplanted by transport by truck, in spite of the difficulties of maintaining a good state of the ground coatings made up sometimes simply, and subjected to the mud torrents started by an abrupt fusion of glaciers recovering the volcanos. Iceland does not have a railroad. The national airline company Icelandair ensures of the connections of the airport of Keflavík towards North America and Europe. The company at low prices Iceland Express connects Keflavík to some destinations in Western Europe such London and Copenhagen. It is possible to reach the country, in summer, by ferry since the Denmark or the Norway after a stopover with the Faroe Islands.

Companies

Economic agreements

Iceland adhered to the European Free Trade Association (EFTA) in 1970 and took part in a customs officer with the European Union in 1973. Following its adhesion with the European Economic space in 1994, There are a freedom of movement of the capital, work, goods and services between Iceland and the countries of the European Union. However, the government of Iceland east opposed to adhesion with the European Union, mainly by fear of the loss of control of its policy of fishing.

Economic policy

See too

Notes and references

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