Research Paper on "Economic Crisis Iceland 2008"

Research Paper 4 pages (1162 words) Sources: 6

[EXCERPT] . . . .

Economic crisis: Iceland 2008

Current state of the economy

In numerical data, the economy of Iceland is marked by the following:

A gross domestic product of $12.15 billion, making Iceland the 145th largest economy of the globe (out of 227 countries)

After positive GDP growth rates in 2007 and 2008, 2009 saw a contraction of the national output by 6.6 per cent

The income per capita is of $39,600, significantly higher than the $10,500 global average. Iceland is in fact the 20th largest country in terms of GDP per capita

Similar to the global trend, the large majority of the national output is generated by services, followed by industry and agriculture. Specifically, the services account for 70.8 per cent of the GDP; industry accounts for 24 per cent and agriculture contributes with 5.2 per cent to the gross domestic product

The Icelandic labor force is composed of 180,900 individuals, most of whom are employed in services (73 per cent), followed by industry (22.2 per cent) and agriculture (4.8 per cent)

The unemployment rate is of 8.2 per cent, having registered a significant increase since its 4.8 per cent value in 2008

The federal budget is composed of expenditures in the amount of $6.729 billion and revenues of $4.844 billion, revealing as such a $1.885 billion federal deficit

The public debt accounts for 107.6 per cent of the gross domestic product -- the ninth largest public debt in the world

The inflation rate of 12 per cent is one of the lowest at a global scale



The country's economic growth and stability remain sensitive to fishery activities, which constitute more than 40 per cent of the export income, 12 per cent of the gross domestic product and employ 7 per cent of the labor force (Central Intelligence Agency, 2010).

Today, the federal actions regarding the Icelandic economy remain focused on stabilizing the climate and increasing the trust in the state by both citizens as well as foreigners. A specific question which is currently being addressed refers to the adherence of Iceland to the European Union. In the immediate aftermath of the crisis, an idea was issued according to which the insular country would intensify its efforts of adhering to the European Union. This measure would also imply the adoption of the euro as the national currency and the hope was that of a better protection in the face of future economic crises.

Despite the higher level of protection, the adherence to the EU would have also implied higher levels of involvement from the European Community. One direct consequence would have been the loss of control over the revenues from fishery activities. Additionally, it was believed that the European Union would impose union wide measures of dealing with the crisis and that the necessity of complying with the respective measures might not materialize in the most positive result for Iceland. In this light of thoughts, the process by which the country would adhere to the EU and adopt the euro as its national currency was put on hold. "The collapse of the financial system initially led to a major shift in opinion in favor of joining the EU and adopting the euro, although support has dropped substantially because of concern about losing control of their fishing resources and in reaction to measures taken by EU partners following the financial crisis" (Central Intelligence Agency, 2010).

Iceland is currently using the money it received as loan from the International Monetary Fund and six other countries… READ MORE

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