6. Economic Affairs

The nation’s large economy is built, in particular, on the back of rich natural resources like the fishing grounds around the country, hydro-electric power and geothermal energy. The nation is a welfare state, with a mixed economy, and private enterprise blooms.

The Icelandic economy is very dependent on the fishing industry, with fish products being the most significant national export, making up about 40% of all its exports.  Only about 3% of Icelanders make their living from agriculture, the largest part of which involves livestock farming. New farm enterprises have developed in recent years, such as fur farming, fishing farming, and forest cultivation. The proportion of the work-force in industry has grown steadily throughout the twentieth-century, especially in the food industry, construction industry and large scale industry which provides almost 40% of Iceland´s export income. Pharmaceutical industry and Software enterprises have also developed substantially as well as tourism, and attempts have been made to create a greater variety of occupations and increase large scale industry.

Economic growth was at an average around 4,3% from 1997 to 2005 and increased fast until 2008. That economic growth is more than the rate which has been experienced by the world’s industrial nations over the same period. Purchasing power increased by around 27% from 1995-2003, which is an increase of about four times that of nations comparable to Iceland, the purchasing power kept increasing until January 2008.

In September 2008 three of the country's major commercial banks collapsed and the Icelandic economy went through a serious financial crisis.
      The inflation rate has been a problem in Iceland for a long time. In the last decade particular emphasis was laid on creating stability in economic affairs. The result of these steps were positive and the inflation rate stayed between 1.5 to 2.5%. However in the last years the inflation rate have been rising again up to 4,6% on average 2006 and up to 19% in January 2009, since then the inflation rate has decreased and the inflation been as low as 1% on average in the year 2014 and 1,6% in the year 2015.
    The employment situation has been good and employment opportunities are varied. The unemployment rate was often about 3,0-3,5% and in the year 2007 is was as low as 1,0%, while the average unemployment rate in Europe was around 7%. After the financial crisis in September 2008 the unemployment rate increased rapidly up to 9%, but has since then gone down and was around 4% on average in the year 2015.
    Despite the stable growth in the people’s prosperity, many are of the view that all are not benefiting equally from it. The national cake is not evenly divided, with disadvantaged groups such as the old and handicapped getting a small share. There are many things in the society which indicate that the gap between rich and poor is increasing.

Icelandic notes and coin