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Iceland Iceland

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Iceland

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EconomicPoliticalStructural

Iceland – Quick View
ECR score59.84 (Mar 2011)
ECR rank46 (Mar 2011)
Economic
GDP at current prices (2010)USD 12.35 billion
GNI per Capita PPP (2010)USD 22,917
FDI Inflow (2009)USD 75.17 million
Inflation (2010)5.4%
Central Bank Assets (2010)USD 22,339 million
Unemployment rate 2010 (estimate)7.6%
Government surplus 2010 (till Q3)USD 0.61 billion
Tax revenue 2010 (till Q3)USD 2.90 billion
Political
Government typeParliamentary Democracy
Recent political crisisNA
Economic freedom score (2011)44th
Freedom of information score (2010)2nd
Corruption perception index (2010)11th
Structural
Crude Birth rate (2009)15 per ‘000
Population balanceUnder 14 – 21%
Population balanceOver 65 – 12%
Life expectancy yearsMale 79.7 years
Life expectancy yearsFemale 83.3 years
Under-5 Mortality Rate (2010)3 per ‘000
Literacy rate (2009)99%
Internet access97.6%

[Top] Economic Overview

Iceland has a welfare-based economy. Its fishing industry contributes substantially to the national GDP, employment and exports. 

(Source:BBC)

Gross Domestic Product (GDP)

Iceland GDP at current prices

(Sources:National Statistics)

Iceland’s GDP was on a steady rise from 2005 to 2010, when it reached ISK 1,539,512 million.

GDP volume growth rate

Iceland GDP growth rate

(Sources:National Statistics)

GDP growth rate declined from 7.5% in 2005 to -6.9% in 2009. As of 2010, the rate is registered at -3.5%

Gross National Product (GNI)
Iceland GNI

(Sources:National Statistics)

Iceland’s GNI showed steady growth from ISK 989,764 million in 2005 to ISK 1,236,756 million in 2007. However, from 2007 to 2008, the amount dropped marginally to ISK 1,163,726 million. But by the end of 2010, GNI was registered at ISK 1,265,178 million.

GNI per Capita, PPP

GNI per Capita at PPP of the country was USD 22,917 in 2010.

Iceland GNI per capita, PPP

(Source: UNDP)

Tax rate

Iceland has a progressive taxation system. Income Tax rate in the country is 46.28%.

Income tax rates (2011)

Annual Income (ISK)

Tax Rate (%)

Up to 2,400,000

24.1

2,400,000 to 7,800,000

27

Above 7,800,000

33

 (Source: Tax Rates)

The corporate tax rate varies from 18% to 32.7%. The Value Added Tax (VAT) rate is 25.5%.

(Sources: Tax Rates)

Inflation

Iceland Inflation(Source: National Bank)

FDI inflow shows consistent growth from 2005 to 2007.  However, from 2007 to 2009 it witnessed a decline from ISK 437,162 million to ISK 9,374 million.

Central bank assets

Iceland Central bank assets

(Source:National Bank)

Central Bank of Iceland (CBI) is the chief monetary authority of the country.
 
Its assets declined from ISK 4,087,210 million in 2009 to ISK 2,784,033 million in 2010.

In January 2011, the amount is registered at ISK 2,786,859 million. 

[Top] Financial Indicators & Government Financial

CPI (Consumer Price Index)

Iceland CPI

(Sources:National Statistics)

From 2005 to 2010, CPI increased steadily from 244.1 to 363.2. In January 2011, the CPI is measured at 363.4.

Interest rates on saving deposits

Iceland Interest rates on saving deposits

(Sources: National Bank, Deposit Money bank Rates: Excel Sheet)

Interest rates increased from 2005 to 2008 at a CAGR of 58.74%. From 2008, there was consistent decline from 8% in 2008 to 0.1% in 2010.  

Money supply

Notes in circulation (Jan 2011)

Denomination

Number of notes

5,000 kr.

29,847,500,000

2,000 kr.

599,000,000

1,000 kr.

2,767,500,000

500 kr.

970,250,000

Total

34,184,250,000

(Source: National Bank)

In 2011, the total number of notes in circulation is valued at 34,184.25 million.

Coins in circulation(Jan 2011)

Denomination

Number of notes

100 kr.

1,345,600,000

50 kr.

412,390,000

10 kr.

392,920,000

5 kr.

97,934,000

1 kr.

95,554,000

Total

2,344,398,000

(Source: National Bank)

In 2011, the total number of coins in circulation is 2,344.398 million.

Exchange rate

Iceland Exchange rates

(Source: National Bank)

From 62.86 in 2005, USD appreciated against ISK to reach a high of 123.59 in 2009. However, in 2011, the exchange rate value is 115.8 (USD/ISK).

Government finances

Fiscal balance (General Government) (ISK billion)

 

2010

2009

2008

2007

2006

2005

Total Revenue

650.5

614.3

653.6

623.8

560.5

483.6

Total Expenditure

747.9

763.3

853.7

553.1

486.6

433.3

Fiscal Balance

-97.4

-149

-200.1

70.7

73.9

50.3

 (Source: National Statistics)

Fiscal balance showed surplus from 2005 to 2007. 2008 and 2009 witnessed heavy deficits of ISK 200.1 billion and ISK 149.0 billion respectively. Finally, in 2010, deficit was registered at ISK 97.4 billion. 

Tax revenue & grants (ISK billion)

 

2010

2009

2008

2007

2006

2005

Tax Revenue

489.9

459.9

500.8

490.5

445.4

383.7

Grants

2.3

2.2

1.5

1.1

1.4

1.2

(Source: National Statistics

Tax revenue collected by Iceland’s government increased steadily from 2005 to 2008. The amount fell from ISK 500.8 billion in 2008 to 459.9 billion in 2009. In 2010, revenue from taxes is amounted to ISK 489.9 billion. Grants received by the Government varied from ISK 1.1 billion to 2.3 billion between 2005 and 2010.

Current account balance

Iceland current account balance
(Source: National Bank)

The nation’s current account balance shows continuous deficits from 2007 to 2010. The highest deficit amounted to ISK 367,498 million in 2008. But by 2010, the deficit amounted to ISK 120,479 million.  

Balance of Payments

 Iceland Balance of payments

(Source: National Bank:)

Iceland’s balance of payments shows strong fluctuations between 2007 and 2010. The highest surplus was registered in 2008 at ISK 1,181,868 million. However, the balance fell to a deficit of ISK 90,445 million in 2010.

[Top] Labour Force and Employment Overview

Iceland’s Ministry of Labour, Family and Social Affairs is the governing authority of matters related to labour relations, family and social welfare. Some of the various issues under labour relations are workers’ rights and responsibilities, wage policy, occupational safety, pension schemes and insurance. 

Under the general employment contract of the labour law, contracts are divided into: fixed-term, part-time and working from home. The law also stipulates equal remuneration for men and women. Under special allowances and increments, there are provisions for holiday allowance, parenthood allowance, liability for damage, severance pay, retirement benefits, reimbursement of work-related expenses etc.

(Sources: Ministry of Welfare, Euro.who)

Total unemployed by age structure

 

2010

2009

2008

2007

2006

2005

16-24 years

4,900

4,700

2,600

2,200

2,500

2,000

25-54 years

7,300

7,200

2,400

1,600

2,100

1,900

55-74 years

1,500

1,200

500

300

500

400

Total

13,700

13,100

5,500

4,200

5,000

4,300

(Source: National Statistics)

Iceland’s number of unemployed population shows an overall increase from 2005 to 2010, with a significant rise from 2008 to 2009. Specifically the age group of 25 to 54 year olds witnessed a 66.67% leap in unemployment from 2008 to 2009.

Unemployment Rate

Iceland Unemployment rate
e = estimate

The unemployment rate of Iceland was averaged at about 2.7% from 2005 to 2008. However, in 2009 and 2010, the unemployment rate doubled to 7.2% and 7.6% respectively.

Level of unionisation

About 85% of labourers are unionised. Trade unions and employers reach collective agreements to fix minimum wages and other work related issues.

The wage-earners of Iceland were entitled to some of the most important labour rights after 1938, when the Act on Labour Unions and Labour Disputes was passed. This act entitled labour unions to enter agreements determining minimum wages, and covered significant labour welfare issues regarding strikes and dispute settlements. Furthermore, the act established the formation of a labour Court who deals specifically with labour-related cases.

   (Sources: Ministry of Welfare, Euro.who)

[Top] Political Stability

Iceland is a parliamentary democracy, thus the Parliament holds the ultimate legislative power. The country adopted a written constitution in 1944.

The President and the government hold the executive power of the nation. The President is elected by universal suffrage for a term of four years. The Prime minister is appointed by the President. The legislative power is held by the President and the Parliament.

Among the prominent political parties, the Independence Party is the largest, with 22 members. It is a right-wing party which rules in coalition with the Progressive party. The Social Democratic Alliance, the Left-Green Movement and the Liberal Party are the current opposition parties.

The country has a very low political risk score and has no military. It has never been involved in a war and has one of the lowest crime rates in the world.

(Sources: Government of Iceland)

Regulatory environment

Iceland Economic Freedom Indices

(Source: Heritage.org)

Iceland has the world’s 44th freest economy on the 2011 Economic Freedom Index, with a score of 68.2. It scored 5.5 points lower than the previous year and currently stands 21st out of 43 EU nations.

(Source: Heritage.org)

Corruption perception       

The Corruption Perceptions Index (CPI) is a survey that measures the perceived level of corruption across countries worldwide. Iceland is ranked 11th among 178 countries in the 2010 Corruption Perception Index. This indicates that the corruption level in Iceland is very low, and the government also encourages a transparent and accountable system of control.

(Source: Transparency.org)

Freedom of information

In 2010, Iceland stood 2nd on Press Freedom Index, with a score of zero. A lower score indicates more freedom thus denoting that Iceland is one of the countries where the press enjoys most freedom. There are no regulations of the government on the press.  

Additonally, citizens also enjoy the right to freedom of opinion and expression, which is only questioned if it is against public interest.

(Source: rsf.org, Government of Iceland)

Judicial system

Iceland’s judicial court is divided into the District courts and the Supreme Court. There are eight independent District courts, one for each district.

The Parliament regulates the activities of the courts. The Minister of Justice appoints the nine judges to the Supreme Court according to the recommendations of the board of appointment. According to the Act on Judiciary, the administration of the District Courts is in the hands of the Judicial Council, who prepares guidelines for the work of district courts and regulates their activities. District Courts act as the Courts of First Instance and hear civil and criminal cases. The process of conducting these cases is governed by the Laws of Civil and Criminal Procedures. 

(Sources: Icelandic Financial Services Association, Scandinavian Law, Supreme Court of Iceland)

[Top] Demographic Overview

Iceland’s population is 318,452.

(Source: National Statistics)

Iceland Population

(Source: National Statistics)

In the last decade, the population has risen steadily except from 2009 to 2010.  The population’s median age is registered at 35.1 years.

(Source: undp)

Gender ratio at birth

In 2010, the gender ratio was recorded at 106 male births (per 100 female births).

(Source: undp)

In 2009, 68% of the population was 15 to 64 years old, followed by 21% under the age of 15 and 12% of the population was above 65 years old. 

(Source: World Bank)

Under-5 mortality rate

In 2010, the under-5 mortality rate was recorded at 3 (per 1000 births).

(Source: undp)

Crude birth rate

In 2009, Iceland’s recorded a crude birth rate of 15 (per 1000).

(Source: UNICEF)

Life expectancy

Life expectancy among women is 83.3 years, which is higher than that of men, which is only 79.7 years.

(Source: National Statistics)

Dependency ratio

In 2010, 47.2% of population was recorded as dependent.

(Source: undp)

Urbanisation

In 2010, 93.4% of the population was classified as urban.

(Source: undp)

Human Development Index (HDI)

The country is ranked 17th on United Nation’s 2010 Human Development Index. Hence, it falls in the category of ‘Very High Human Development.’ HDI integrates a country’s life expectancy, schooling and income. This signifies the overall social and economic development of a nation.

(Source: undp) 

[Top] Soft Infrastructure

Education

The Parliament is legally in charge of the education system. The jurisdiction of the system falls under Ministry of Education Science and Culture, who is in charge of administration, regulatory amendments, and educational development policies.  However, the educational syllabus is developed by the National Centre for Educational Materials.

Education is compulsory from 7 to 16 years of age. There are separate laws drafted for different levels of education such as Primary, Secondary and Higher Education. Furthermore, there are 101 local municipalities who are responsible for the operation of schools of the compulsory levels. However, upper secondary and higher education level institutions are governed by the state.

21 local education offices offer specialized services to schools such as school psychology services, pedagogical counselling and educational counselling. Furthermore, special education regulations are in place to ensure that children with special needs receive access to educational facilities.

(Source: UNESCO, Europa.eu, Guardian)

Health

The Ministry of Health and Social Security is the governing authority of Iceland’s healthcare system. It is divided into various specialized departments.

National health records are annually published and well-maintained. The electronic healthcare database is harmonized across the country allowing data security, easy access to information and transparency of funds. The system is funded by general taxation, with approximately 85% of the finances derived from the state and 15% from municipalities.

The Icelandic Nutrition Council sets nutritional intake targets for the population and promotes healthy living.

The Centre for Preventive Health Care is responsible for the co-ordination of national maternal and child health care centres. These centres are diversified into carrying out activities such as dental care, counselling, primary school level health awareness and preventive care at the workplace.

The healthcare conditions in the country have improved remarkably as a result of new policies established in the early 20th century, when free nursing facilities were provided to underprivileged people, tuberculosis prevention arrangements were made, several preventive acts were implemented across the nation and health insurance funds were introduced.

(Sources: Euro.who)

[Top] Hard Infrastructure

Mass public transit

Mass public transport services consist of buses and cars, as the country has no railway service. Cars are the primary mode of transport used by the masses, but ‘Bifreiðastöð Íslands’ (BSÍ) is an organization offering long-distance bus service across the country.

Roads

The roadways stretch up to 13,000 km, of which 4,800 km are paved and 30 km are tunnelled. This network spreads across Iceland, covering remote locations and Iceland’s coastal communities.

(Sources: Ministry of the Interior, Ministry of Fisheries and Agriculture

Airways

The country has seven international airlines, all of which are private. Two of these provide direct services to destinations across Europe and the US.    

There are 18 airports in the country. 

(Sources: Ministry of the Interior, Ministry of Fisheries and Agriculture,Aircraft Charter World

Waterways

Most of Iceland’s foreign trade is handled by ship.  Thus, the nation has an efficient maritime transport system.  Iceland has 57 ports, out of which 15 are very well advanced and handle heavy cargo activity. The harbours regularly handle cargo from ports of the US and Europe. The nation’s main port is Reykjavik, where about 70% of the national imports are received.  

(Sources: Ministry of the Interior, Ministry of Fisheries and Agriculture)  

Telecommunication

Iceland’s Ministry of Communication is responsible for telecom regulations in the country.

Iceland has a fairly advanced communication infrastructure with wide-ranging broadband facilities, a well-covered cell phone network and terrestrial network stations.  In 2007, Iceland had the third-highest broadband penetration among OECD nations. Furthermore, 92% of Icelanders owned a computer in 1998.

Iceland is a strategic location for international data centres. The country currently has many data centre building plans in the pipeline.

In 2010, 301,600 people, accounting to about 97.6% of entire population, were internet users, increasing 79.5% over the past decade.

(Sources: Iceland Trade Directory, Post and Telecommunication Exchange, Ministry of Industry, gigaom, Europa.eu, Mila.is, Data Center Knowledge. Internet World Stats)

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