The Economy and Industry

Main pillars of the economy

The fishing industry

For a long time fishing was the foundation of the Icelandic economy, and at one point over 90% of export earnings came from seafood. Today the share is much lower, but the sector is still one of the most important. A quota system was introduced in 1984, and quotas became freely transferable in 1990. The system is considered to have ensured sustainable fishing and profitability, but it has always been controversial, not least over who should benefit from the resource. The Marine and Freshwater Research Institute advises on the total allowable catch each year.

Tourism

Tourism became the country's largest export sector in the mid-2010s. After the Eyjafjallajökull eruption in 2010, interest in Iceland grew enormously and visitor numbers multiplied within a few years. The growth has created jobs all over the country but has also put pressure on nature, roads and the housing market. The pandemic of 2020–2021 hit the sector hard, but it recovered quickly.

Energy-intensive industry

Cheap, renewable energy has attracted international heavy industry to Iceland. The Straumsvík aluminium smelter began operating in 1969, the Grundartangi smelter in 1998 and the Reyðarfjörður smelter in 2007. Aluminium is one of the country's main exports. In recent years data centres have also been built. Energy production is covered on our page about energy.

The knowledge-based sector

Icelandic technology companies have been successful worldwide. Marel makes equipment for food processing, Össur makes prosthetics and CCP created the online game EVE Online. Pharmaceutical, biotech and software companies have grown rapidly, and the knowledge-based sector is now regarded as the fourth pillar of exports.

The Icelandic króna

The Icelandic króna became an independent currency in the early 20th century; before that it was equal to the Danish krone. In 1981 a new króna was introduced and two zeros were removed. The króna has fluctuated greatly, especially during the 2008 banking crash, when it lost almost half its value. The question of adopting the euro or another currency comes up regularly. Banknotes come in 500, 1,000, 2,000, 5,000 and 10,000 krónur, but cards and mobile payments dominate – many Icelanders almost never use cash.

The banking crash and recovery

After the privatisation of the state banks in 1998–2003, Glitnir, Kaupþing and Landsbankinn grew rapidly with borrowed money and acquisitions abroad. When the global financial crisis struck in autumn 2008, the banks collapsed within a few days. Emergency legislation was passed, capital controls were introduced and the IMF provided a loan. The banks were rebuilt on a domestic basis, and capital controls were largely lifted in 2017. A Special Investigation Commission of the Althing published a detailed report on the causes of the crash in 2010.

The labour market

Labour force participation is among the highest in Europe, for both men and women. Union membership is about 90%, one of the highest rates in the world. Collective agreements are negotiated between the main labour confederations, such as ASÍ and BSRB, and the Confederation of Icelandic Employers.