Iceland identity card
- Capital city : Reykjaví Area: 120 165 km² Population: 340 inhabitants (000).
- Density Â Hope Language : Icelandic.
- Change : Icelandic kró (ISK), kró GDP per capita : approximately $ 52 (000).
- Religion: lute Ré President : Guðni Thorlacius Jóhannesson (since August 2016, re-elected in June 2020).
- Hours of Hours of sunshine at the winter solstice: 4 hours and 7 minutes (hard, hard!).
- Dice index Unesco heritage sites: Þingvellir National Park (2004), the volcanic island of Surtsey (2008) on the Vestmann Islands and Vatnajökull National Park (2019).
The 2008 financial crisis
With the international financial crisis and the collapse of its banking system in October 2008, the 5th richest country in the world, ranked 2007st in the world in 1 on the human development index, fell in one week from the status of rich prosperous nation to that of the most indebted country on the planet. The total public debt reached 6,67 billion in 2008; at the end of 2009, it corresponds to 78% of the national GDP. After a decade of euphoria and annual growth of between 4 and 7%, the country is bankrupt, with blocked credits, frozen accounts, volatilized savings ...
We must go back to the rate lower than those of loans in crowns, but likely to evolve if the national currency is attacked ... The Icelanders begin to borrow and consume at all costs: purchase of second homes, brand new 4x4s , trips abroad, etc.
Based on massive loans abroad, this rapid growth remains illusory and artificial. Consequently, the Icelandic krone is overvalued. When, thanks to the global economic crisis in 2008, the krone loses half of its value, most Icelanders have to face repayments indexed to inflation, which double!
At the end of 2008, faced with a financial sector suddenly cut off from foreign capital, the government nationalized Glitnir, Landsbanki and Kaupþing. The country is sinking into crisis: inflation soars, wages are frozen, the standard of living falls dramatically and unemployment explodes.
To help the country restart, the International Monetary Fund and other countries are giving Iceland loans totaling nearly $ 10 billion. Loans fully repaid in anticipation in 2016.
After the crisis
Despite the weight of debts and the stress caused (in 2015, the country was still the biggest consumer of antidepressants in the world), for the majority, the Icelandic recipe for the crisis has finally been a success. The country has succeeded in stabilizing the crown by reorganizing its banking sector: exchange controls have been put in place, the deficit has been reduced and the economy diversified.
THEinflation has now stabilized at around 3%, the country was able to return to borrow on international markets in 2011 and unemployment has fallen significantly.
We hear that dealing with the crisis is an example of a “purge” that should be followed in other countries. This may be true, but the cost to Icelandic public finances has been very high. So the public debt, after peaking, melts like snow in the sun and returned to 35% in 2018.
The pillars of the Icelandic economy
Iceland has solid resources in 3 areas: fishing, tourism and the aluminum industry.
Its historical pillar: the Peach, which still represents today 20% of exports for nearly 6% of GDP, the processing sector accounts for 11% of GDP.
Since about 2005, it's good tourism which made Icelandic growth soar. The tourism industry is the country's main source of income.
While it obviously benefits the Icelandic economy, this tourist boom does not only have advantages since it causes demand for crowns and increases their price. It also impacts the environment (degradation of vegetation, soil erosion, etc.), besides having to build enough to house tourists, knowing that these investments are only profitable during the summer.
As a result, the drop in tourism recorded in 2019, in particular following the Wow Air low cost airline bankruptcy, has certainly contributed to the decline in economic growth, but at the same time offered a break from this whirlwind of arrivals that Icelanders have had to face very quickly, without being fully prepared. It gives the authorities time to try to solve the equation between tourist reception and preservation of natural sites.
The 3rd pillar of the Icelandic economy is industry aluminum, reinforced by hydroelectricity and geothermal energy. In 2007, Iceland's largest industrial facility was built in the East Fjords: a gigantic aluminum foundry managed by the American group Alcoa. The ore does not come from Iceland, but it is processed here at very competitive costs.
The following year, the Icelandic government gave the green light to the Canadian green energy group Alterra Power to acquire HS Orka, the country's leading private electricity producer.
In 2013, a new project was launched: the exploration of the Icelandic seabed with a view to offshore oil exploitation, entrusted to national interests, but also Norwegian and ... Chinese.
Other promising economic sectors : software production, call centers and biotechnology.