Iceland

About Iceland

Background:

Settled by Norwegian and Celtic (Scottish and Irish) immigrants during the late 9th and 10th centuries A.D., Iceland boasts the world's oldest functioning legislative assembly, the Althing, established in 930. Independent for over 300 years, Iceland was subsequently ruled by Norway and Denmark. Fallout from the Askja volcano of 1875 devastated the Icelandic economy and caused widespread famine. Over the next quarter century, 20% of the island's population emigrated, mostly to Canada and the US. Limited home rule from Denmark was granted in 1874 and complete independence attained in 1944. Literacy, longevity, and social cohesion are first-rate by world standards.

PEOPLE

Population:
306,694 (July 2009 est.)
country comparison to the world: 178

Nationality:
noun: Icelander(s)
adjective: Icelandic

Ethnic groups:
homogeneous mixture of descendants of Norse and Celts 94%, population of foreign origin 6%

Religions:
Lutheran Church of Iceland 80.7%, Roman Catholic Church 2.5%, Reykjavik Free Church 2.4%, Hafnarfjorour Free Church 1.6%, other religions 3.6%, unaffiliated 3%, other or unspecified 6.2% (2006 est.)

Languages:
Icelandic, English, Nordic languages, German widely spoken

GOVERNMENT

Country Name:
conventional long form: Republic of Iceland
conventional short form: Iceland
local long form: Lydveldid Island
local short form: Island

Government type:
constitutional republic

Capital:
name: Reykjavik
geographic coordinates: 64 09 N, 21 57 W
time difference: UTC 0 (5 hours ahead of Washington, DC during Standard Time)

Independence:
1 December 1918 (became a sovereign state under the Danish Crown); 17 June 1944 (from Denmark)

Flag description:
blue with a red cross outlined in white extending to the edges of the flag; the vertical part of the cross is shifted to the hoist side in the style of the Dannebrog (Danish flag); the colors represent three of the elements that make up the island: red is for the island's volcanic fires, white recalls the snow and ice fields of the island, and blue is for the surrounding ocean

ECONOMY

Economy - overview:
Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system. Prior to the 2008 crisis, Iceland had achieved high growth, low unemployment, and a remarkably even distribution of income. The economy depends heavily on the fishing industry, which provides 40% of export earnings, more than 12% of GDP, and employs 7% of the work force. It remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, with new developments in software production, biotechnology, and tourism. Abundant geothermal and hydropower sources have attracted substantial foreign investment in the aluminum sector and boosted economic growth, although the financial crisis has put several investment projects on hold. Much of Iceland's economic growth in recent years came as the result of a boom in domestic demand following the rapid expansion of the country's financial sector. Domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign-currencies, following the privatization of the banking sector in the early 2000s. Worsening global financial conditions throughout 2008 resulted in a sharp depreciation of the krona vis-a-vis other major currencies. The foreign exposure of Icelandic banks, whose loans and other assets totaled more than 10 times the country's GDP, became unsustainable. Iceland's three largest banks collapsed in late 2008. The country secured over $10 billion in loans from the IMF and other countries to stabilize its currency and financial sector, and to back government guarantees for foreign deposits in Icelandic banks. GDP fell 6.3% in 2009, and unemployment peaked at 8.8%. GDP growth is expected to be near zero in 2010. Since the collapse of Iceland's financial sector, government economic priorities have included stabilizing the krona, reducing Iceland's high budget deficit, containing inflation, restructuring the financial sector, and diversifying the economy. Three new banks were established to take over the domestic assets of the collapsed banks. Two of them have foreign majority ownership, while the State holds a majority of the shares of the third. British and Dutch authorities have pressed claims against Icelandic Landsbanki to compensate their own citizens for losses suffered on deposits held in that bank. The collapse of the financial system initially led to a major shift in opinion in favor of joining the EU and adopting the euro, although support has dropped substantially because of concern about losing control of their fishing resources and in reaction to measures taken by EU partners following the financial crisis.

GDP (purchasing power parity):
$12.2 billion (2009 est.)
country comparison to the world: 142
$13.02 billion (2008 est.)
$12.85 billion (2007 est.)
note: data are in 2009 US dollars

GDP - per capita (PPP):
$39,800 (2009 est.)
country comparison to the world: 20
$42,800 (2008 est.)
$42,600 (2007 est.)
note: data are in 2009 US dollars

Budget:
revenues: $3.879 billion
expenditures: $5.488 billion (2009 est.)

Inflation rate (consumer prices):
12% (2009 est.)
country comparison to the world: 201
12.7% (2008 est.)

Industries:
fish processing; aluminum smelting, ferrosilicon production; geothermal power, hydropower, tourism

Exports:
$4.218 billion (2009 est.)
country comparison to the world: 110
$5.399 billion (2008 est.)

Imports:
$2.826 billion (2009 est.)
country comparison to the world: 137
$5.699 billion (2008 est.)

Exchange rates:
Icelandic kronur (ISK) per US dollar - 128.417 (2009), 85.619 (2008), 63.391 (2007), 70.195 (2006), 62.982 (2005)