Iceland - Overview
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Confronted to the total collapse of its financial system, the former government of Geeir Haarde had to nationalize the country's main banks. However, inflation continues to climb (reaching almost 18.6% today). In November 2008, the IMF granted a loan of USD 2 billion in order to stabilize the Icelandic krona's exchange rate, which has suffered considerably due to the crisis, and to re-establish confidence in the economy. In order to benefit from European aid and from the protection that the Euro currency provides, Iceland requested in July 2009 a candidature for its accession to the European Union. The country has officially declined to go further due to the anti-European sentiment of its population.
in 2013 the growth rate reached 1.9% (following 2.5% in 2012) and should come back to 2.5% in 2014. Main factor in this growth rate, household consumption will remain strong in 2014, pushed by the sharp decrease of unemployment (5.6% in 2013 due to the tourism boom), by the increase in salary and by the stabilization of inflation (3.8% in 2013).
The Icelandic economy relies partly in its renewable natural resources and its related industries: deep sea fishing, hydraulic and geothermal power and pastures.
Fishing accounts for almost 6% of GDP (more than 11% with the processing sector and over 18% when counting its indirect contribution).
It has been several years that its economy has also grown thanks to the services sector. As a fact, Iceland has become the rear-base of several companies specialized in computers and software. There are also many calling centers in the Icelandic territory.
Foreign trade overview
In 2013, Iceland's main customers have been the Netherland (over 30% of exports), Germany, the UK, Norway and the United-States.
Its main suppliers were Norway (over 17% of imports), the USA, Germany, China and Brazil.
The potentials of hydroelectricity stimulates aluminum production, the leading resource for export concentrating 70% of the electricity produced on the island in 2013.
Foreign direct investment in Iceland, which had been growing regularly during the pre 2008 years, fell that year essentially due to Iceland's over-exposure in the international markets combined to the general bankruptcy of the country's banking system. The FDI was mainly directed towards retail sales, biotechnology, geothermal science, information and communication technologies and health technologies. Franchising is in full-growth in Iceland, especially in the retail sector.
Iceland's main advantages to a company in terms of investment are: an English-speaking manpower, a positive economic environment and a high purchasing power. The main drawbacks of investing in Iceland are: high cost of living, a weak demography, a bankrupt financial system, and its long distance from the European continent. Due to the deep financial crisis that Iceland has gone through, FDI has strongly decreased. However, since 2011, the country has managed to meet the commitments made to the IMF which has sent a positive message to foreign investors in 2012 and 2013. The total of FDI influx in 2013 has been just over USD 500 million.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).