Nation at a Glance - Iceland

History

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 Althingi, 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. Denmark granted limited home rule in 1874 and complete independence in 1944. The second half of the 20th century saw substantial economic growth driven primarily by the fishing industry. The economy diversified greatly after the country joined the European Economic Area in 1994, but Iceland was especially hard hit by the global financial crisis in the years following 2008. Literacy, longevity, and social cohesion are first rate by world standards.

Location: Northern Europe, island between the Greenland Sea and the North Atlantic Ocean, northwest of the United Kingdom

Border Countries: 0 km

Total Area: 103,000 sq km Land: 100,250 sq km Water: 2,750 sq km

Climate: Temperate; moderated by North Atlantic Current; mild, windy winters; damp, cool summers

Terrain: Mostly plateau interspersed with mountain peaks, icefields; coast deeply indented by bays and fiords

Natural resources: Fish, hydropower, geothermal power, diatomite

Land use: Agricultural land: 18.7% arable land 1.2%; permanent crops 0%; permanent pasture 17.5% Forest: 0.3% Other: 81% (2011 est.)

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

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

Religions: Evangelical Lutheran Church of Iceland (official) 73.8%, Roman Catholic 3.6%, Reykjavik Free Church 2.9%, Hafnarfjorour Free Church 2%, The Independent Congregation 1%, Other religions 3.9% (includes Pentecostal and Asatru Association), None 5.6%, Other or unspecified 7.2% (2015 est.)

Population: 335,878 (July 2016 est.)

Administrative divisions: 8 regions; Austurland, Hofudhborgarsvaedhi, Nordhurland Eystra, Nordhurland Vestra, Sudhurland, Sudhurnes, Vestfirdhir, Vesturland

Economy: Iceland's economy combines a capitalist structure and free-market principles with an extensive welfare system. Except for a brief period during the 2008 crisis, Iceland has in recent years achieved high growth, low unemployment, and a remarkably even distribution of income. Tourism, aluminum smelting, and fishing are the pillars of the economy. For decades the Icelandic economy depended heavily on fisheries, but tourism has now surpassed fishing and aluminum as Iceland’s main export industry. Tourism accounted for 8.6% of Iceland’s GDP in 2016, and 39% of total exports of merchandise and services. From 2010 to 2017, the number of tourists visiting Iceland increased by nearly 400%. Since 2010, tourism has become a main driver of Icelandic economic growth, with the number of tourists reaching 4.5 times the Icelandic population in 2016. Iceland remains sensitive to fluctuations in world prices for its main exports, and to fluctuations in the exchange rate of the Icelandic Krona. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, particularly within the fields of tourism, software production, and biotechnology. Abundant geothermal and hydropower sources have attracted substantial foreign investment in the aluminum sector, boosted economic growth, and sparked some interest from high-tech firms looking to establish data centers using cheap green energy. Following the privatization of the banking sector in the early 2000s, domestic banks expanded aggressively in foreign markets, and consumers and businesses borrowed heavily in foreign currencies. 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 nearly nine 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 6.8% in 2009, and unemployment peaked at 9.4% in February 2009. Three new banks were established to take over the domestic assets of the collapsed banks. Two of them have majority ownership by the state, which intends to re-privatize them. Since the collapse of Iceland's financial sector, government economic priorities have included stabilizing the krona, implementing capital controls, reducing Iceland's high budget deficit, containing inflation, addressing high household debt, restructuring the financial sector, and diversifying the economy. Capital controls were lifted in March 2017, but some financial protections, such as reserve requirements for specified investments connected to new inflows of foreign currency, remain in place. Most macroeconomic indicators and employment have rebounded to pre-crisis levels, driven primarily by the unprecedented growth in tourism – averaging over 20% annually – following the well-publicized volcanic eruption in 2010.

Agriculture - products: Potatoes, carrots, green vegetables; mutton, chicken, pork, beef, dairy products; fish

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