Historically, Iceland has experienced erratic growth with periods of high inflation. This is a result of its reliance on a few key exports which have fluctuated dramatically in terms of production and price. Throughout the 1990s, the economy experienced a strong economic growth on the back of economic reforms, deregulation and low inflation.
Economy
Iceland was one of the first countries to be hit by the global financial crisis and its economic fortunes declined in dramatic fashion in October 2008. The financial system collapsed spectacularly with major banks being nationalised and the stock market being closed. It was said by many that the country was all but officially bankrupt.
Iceland has since formulated a comprehensive programme to deal with the fallout from the disaster and requested IMF assistance. On 24 October, a rescue package totalling $2.1 billion was announced under the Fund's fast track emergency finance mechanism. On 19 November, the plan was approved by the Executive Board. The two-year Stand-By agreement made $827 million available immediately with the remainder of the $2.1 billion being paid in eight instalments, conditional on quarterly reviews.
According to the Icelandic Government Information Centre, the country with the help of multilateral assistance is now moving toward an economic recovery. Its economic forecast sees the country experiencing two more years of economic contraction before recovering in 2011.
Investment Climate
Foreign direct investment (FDI) is welcomed in Iceland, by both the authorities and the market. The country has systematically made its business environment increasingly attractive to investors. Non-residents are permitted to invest in business enterprises, although there are some limitations. These restrictions apply to the energy sector, the airline sector and the fisheries sector. The majority of investment has been focused on the aluminium industry.
Generally speaking, the country does not offer direct subsidies for business investment. The main incentives lie in the favourable environment for businesses in general. These incentives include low corporation tax, competitive labour costs and payroll costs and low energy prices. The majority of barriers that stood in the way of investment have been abolished. Iceland's innovative environment, well-educated labour force and competitive labour costs make it a very attractive place for new ventures.
Opportunities
There are opportunities in most industrial and consumer sectors and the widespread use of English creates a good environment for UK exporters. The main UK exports to Iceland are: consumer goods, articles of apparel and clothing accessories, nonferrous metals, specialised industrial machinery, and general industrial machinery and equipment.
UK Trading Relationship
In 2008, the UK exported goods worth £181 million. Over the same period the UK took imports from the country valued at £440 million.
KEY FACTS
Official Name: Republic of Iceland
Capital: Reykjavik
Area: 103,000sq km
Population: 304,000 (UN, 2008)
Major languages: Icelandic
GDP (current): US$19.96bn (World Bank, 2007)
GDP growth: 3.8% (World Bank, 2007)
GNI per capita: US$57,750 (World Bank, 2007)
Inflation (consumer prices): 13.4% (2008 est.)
Labour force: 166,000 (2008 est.)
Unemployment: 9.4% (Feb 2009)
Monetary unit: 1 krona = 100 aurar
Exports to UK: £440.24m (HMRC, 2008)
Imports from UK: £181.09m (HMRC, 2008)
Main Industries
Fish processing, aluminium smelting,ferrosilicon production, geothermal power,tourism.
Main Exports
Fish and fish products, aluminium, animalproducts, ferrosilicon, diatomite.
Main Imports
Machinery and equipment, petroleumproducts, foodstuffs, textiles.
CONTACTS
UK Trade & Investment
Kingsgate House
66-74 Victoria Street
London SW1E 6SW
Tel: 020 7215 8510
Email: karen.hollidge@uktradeinvest.gov.uk
Web: www.uktradeinvest.gov.uk
British Embassy
Laufásvegur 31
101 Reykjavík
Tel: 00 354 550 5100
Email: britemb@centrum.is
Web: www.ukiniceland.fco.gov.uk/en
Embassy of Iceland
2a Hans Street
London SW1X 0JE
Tel: 020 7259 3999
Email: icemb.london@utn.stjr.is
Web: www.iceland.org/uk
