The helicopter view
Iceland is the most sparsely populated nation in Europe, with the majority of its population living in and around the capital Reykjavik.
The economy has recovered well since the 2008 financial crisis, when its three largest banks collapsed. Fishing, aluminium smelting and tourism dominate the economy, the latter being the main driver of economic growth.
Iceland is a member of the European Economic Area (but not the European Union). The EU accounts for 61.5% of the Nordic country’s total trade in goods, followed by the US, Norway and China.
Supply chain issues
A serious volcanic eruption in 2010 disrupted air traffic across Europe, inevitably affecting trade. Free trade agreements are in place with China and members of the EFTA.
Iceland captures around 1m tonnes of fish a year – and geothermal and hydro-electric power allow it to run almost exclusively on renewable energy. The country is often praised for its egalitarian society and high literacy levels, and since 2018 it has been illegal for women to be paid less than men.
The island has multiple active volcanoes and eruptions are certain to happen in the future.
According to the OECD, the economy is slowing down – particularly affected by the insolvency of low-cost carrier WOW air in March this year. The country remains vulnerable to poor fishing seasons and falling aluminium prices.