After the financial crash in 2007, Iceland did everything that larger countries thought was wrong. The banks that were involved with risky international investments were allowed to fail and the bankers were jailed. Iceland’s currency, the krona, was allowed to drop by half against the dollar and has stayed there since. Interest rates in the country were raised to 18% and gradually eased down to 4.25% over several years (a).
By allowing the currency to drop relative to the rest of the world, employers were able to continue paying employees as the same rates relative to the amount of their debts. On a global scale wages were still effectively cut in half, however, local mortgage payments remained at the same level of burden for households. The currency policy allowed non-banking businesses to continue operations and GDP has now recovered from the 2007 crises (a).
In the short term, most businesses on the island declared bankruptcy and were able to restructure and survive. The currency drop has also made it much cheaper to directly invest in Iceland for foreign companies, and exported products more attractively priced. Tourism has also become much more attractive for the island nation.
Trade and import/export opportunities
As a small island nation with limited resources but a higher income point, Iceland presents unique opportunities for trade during this period of lower currency. Most consumer imports are electronics and cars, but as tourism expands there should be opportunities for service providers, hotel operators, and sports and entertainment agencies.
Top Imports (according to MIT):
Top Exports (according to MIT):
We have seen recently that Iceland is becoming an exporter for soccer players and fans. This last week Iceland’s national team has shown a tremendous performance in the Euro Cup. Added to this it is estimated that 8-10% of Iceland’s population is traveling to France to watch their team play. The increased presence of soccer in Iceland is due to a 15 year investment strategy by the government, including indoor soccer fields and the development of more soccer coaches per capita than any other nation (d). Year-round leagues and around 850 UEFA licensed coaches produced a new generation of football players, with about 100 players now abroad (e).
If you are a sports equipment or athletic clothing manufacturer, it might be a good time to look at connections and opportunities in this nation.
Jacob Decker is located at our global headquarters in Scottsdale, Arizona USA.