Economy of Iceland

By | April 29, 2022

According to cheeroutdoor, Iceland belongs to the countries with a monocultural economy, since it is based on catching fish and its subsequent processing, even despite the emergence of new industries and industries. Fishing and fish processing (25-30% of the value of GDP) remain the country’s international specialization, where it occupies one of the leading places in the export of fish products. Fisheries (55% of exports and 62% of the country’s foreign trade income in 2001, agriculture – 2%, industry – 32%) is a powerful industry. Organs for the control of bioresources, relying on constant monitoring of marine areas, determine quotas for fishing. They are distributed through auctions without state intervention. Intense competition has led to a decrease in the number of quota holders and a significant concentration of capital, thanks to which Icelandic anglers are competitive in the world market. The productivity per fisherman in Iceland is more than 200 tons per year, while the following Norway has 60 tons, and in the EU countries 30 tons.

According to the employment structure, Iceland looks like an industrialized country: in agriculture 7.8%, in industry 22.6%, and in the service sector 69.6%. The fish processing complex employs 12% of the economically active population, 1% foreign workers, in particular from Poland. In terms of fish catch (in 2001, 1986 thousand tons), the country occupies 6-7th place in Europe. The main products are mainly herring and cod: frozen, salted (herring) and dried fish, fish oil and fish meal. The sustainable technological development of the fishing industry continues, despite the reduction of fish resources. The Icelandic economy is at a fairly high level. Although the GDP in 2002 was 774.418 million Isl. kroons (8.5 billion dollars), but per capita – 29.446 dollars. The increase for 2002 was 0.5%, while for 1955-2001 it was 3.9%.

The second pillar of national wealth is hydropower, whose reserves are estimated at 30 billion kWh, and geothermal reserves are estimated at 1.5 million GWh annually. Only 1/8 of the energy potential of the rivers is used. Electricity production in 2001 8.02 billion kW (28 thousand kW – 3rd place in the world in terms of per capita consumption). Hydroelectric power plants produced 16.7% of energy, geothermal – 55.4%, and imported oil and coal – 28%. St. 3/4 of the population lives in houses heated by geothermal waters.

Icelanders seek to diversify their industry based on energy, which employs 1/3 of the population. The main industrial production is an aluminum plant, powered by local electricity and imported raw materials. The import of aluminum dioxide is 50-60 million dollars, and the export of aluminum is 220-250 million dollars. The development of energy-intensive industries is carried out with the participation of foreign capital (Norwegian, Swiss): mineral fertilizers near Reykjavik.

There are many small shipyards and ship repair companies serving the fishing fleet. For the domestic market, a number of food, clothing, furniture, electrical industry and building materials are produced. The country participates in the processes of globalization through information technologies related to the new economy: design and software production. Icelanders are striving to develop alternative energy sources, R&D is being carried out to produce hydrogen fuel by electrolysis of water. The government is subsidizing a hydrogen energy project involving foreign companies. Within 20 years, the government intends to transfer vehicles and the fishing fleet to the so-called. fuel cells by obtaining methanol from hydrogen and carbon dioxide,

Agriculture focuses exclusively on meat and wool sheep breeding and dairy farming. Agricultural land makes up 23% of the territory (2.3 million hectares) and is used for meadows and pastures. Forage grasses and potatoes are grown on the 1,000 hectares cultivated. Significant progress in the development of greenhouse management (in the south of the island) based on the use of thermal springs. The country is self-sufficient in meat, fresh vegetables and dairy products, but imports grains and other foodstuffs. The state is supporting 6,000 farms by providing subsidies and restricting imports.

Shipping plays a leading role in the transport system – 1.2 thousand ships with a total displacement of 233 thousand tons, of which: merchant fleet – 40 ships with a tonnage of 10 thousand registered tons, 1 thousand trawlers and other fishing vessels – 200 thousand tons. Domestic transportation is carried out by road and air transport, coastal ships. There are no railroads. The length of motor roads is 13 thousand km, of which 4 thousand km are paved. Most roads are gravel. Hringvegur ring road with a length of 1400 km. There are 160 thousand cars, 548 cars per 1 thousand people. In 2001, 12 airports with concrete runways carried 1.36 million passengers.

The government, as in other Scandinavian countries, pursues an economic policy aimed at economic growth and full employment. Public sector 43.9% of GDP in 2000. The main problems are the volume of fish caught, fluctuations in fish prices and the level of costs associated with fuel prices, since the fishing fleet will remain the main consumer of imported oil products. Here they are guided by the model of the “welfare state”, in which social programs are widely implemented (25.9% of GDP in 2000). Wage growth in 2002 was 5.6%. Thanks to the policy of the authorities, the unemployment rate does not exceed 3.9% with a 43-hour work week and an inflation rate of 6.7%.

The main problem of foreign trade is to ensure a positive foreign trade balance (0.9% of GDP in 2001), which is associated with limited natural resources and world market conditions. Total debt 96.2% of GDP in 2001. Exports $2 billion (25% of GDP) and imports $2.5 billion (27.4%). The country’s external debt is at the level of 2.2-2.6 billion dollars. Export geography: EU countries 65%, USA 13%, Japan 5%. Import geography: EU 56%, Norway 9%, USA 11%. The country received 1.2 million tourists. The trade turnover between Iceland and the Russian Federation is $43.8 million, with a positive balance of the Russian Federation.

Economy of Iceland