Iceland Hotels and Resorts

ECONOMY

Iceland is short of indigenous raw materials and thus relies heavily on foreign trade to keep its relatively successful economy ticking over. Exports of goods and services account for more than one-third of GNP. The largest proportion of these derives from fisheries and related products such as fishmeal and oil. The economy is thus particularly susceptible to fluctuating world prices in this commodity and maintains a broad fisheries exclusion zone (320km/200 miles) to protect its earnings. As several European governments (including the British) have discovered to their cost, the Icelanders are fiercely determined and quite capable of defending their perceived territorial rights. Other sources of revenue come from the sale of minerals such as aluminum, ferro-silicon, cement and nitrates used in fertilizers, although these have lately been affected by low demand. Light industry produces knitwear, blankets, textiles and paint. There is a burgeoning advanced technology sector involved in software and biotechnology, and an embryonic financial services industry.
Accession to the European Economic Area (an amalgam of the EU and the European Free Trade Association; Iceland belongs to the latter) effected a wholesale liberalization of trade among the member states and caused some disruption to the Icelandic economy. This highlighted the fact that Iceland’s economy is too dependent on its fishing industry and needs to diversify in areas that will allow it to compete in international markets. Iceland’s principal import suppliers are, in order of importance, Norway, Germany and the UK. The UK, the USA and Germany are the country’s main trading partners.