Recent economic developement
Since October 2008, Iceland has experienced economic difficulties in the wake of the global financial crisis. It is now heading towards gradual recovery, with multilateral assistance from the IMF and partner states playing a key role. Many industries in Iceland have problems due to this situation, although industries primarily based on export, such as the fishing industry, are benefiting from more favourable exchange rates. As a result of these circumstances, the text in this chapter on the most recent economic developments is outdated. For the latest news on the economy of Iceland we refer to the website of the Central Bank of Iceland.
A century of high but volatile growth
Growth of GDP since 1945; annual percent changes
Source: Statistics Iceland
Over the course of the 20th century, Iceland was transformed from one of Europe’s poorest economies, with about 2/3 of the labour force employed in agriculture, to a prosperous modern economy employing 2/3 of its labour force in services. For most of the century, economic growth was led by the fisheries. Consequently, swings in the fish catch and export prices of marine products were the leading source of fluctuations in output growth.
Post-World War II economic growth has been both significantly higher and more volatile than in other OECD countries. The average annual growth rate of GDP from 1945 to 2008 was about 4%. Studies have shown that the Icelandic business cycle has been largely independent of the business cycle in other industrialised countries. This can be explained by the natural resource-based export sector and external supply shocks. However, the volatility of growth declined markedly towards the end of the century, which may be attributed to the rising share of the services sector, diversification of exports, more solid economic policies, and increased participation in the global economy.
Economy of Iceland,Central Bank of Iceland