The gross domestic product of Iceland was $25.88 billion in 2018, and the growth rate was 4.6%. The country has recovered from the crisis that it suffered in 2008.
In 2008, Iceland nationalized its largest banks, namely, Glitnir Bank, Landsbanki, and Kaupthing Bank, which had defaulted on foreign debt of $62 billion. The collapse of the bank sent foreign investors out of the country. Its currency krona went down by 50 percent, and the stock market fell by 95 percent. The crisis started when the bank accepted deposits from the United Kingdom and the Netherlands and offered an interest rate of 15 percent. This created inflation in the economy. The banks invested in $100 billion in foreign companies, soccer teams, and real estate.
In the 2008 global financial crisis, the major bank shutdown in the United States and the stock market crashed this lead to the banks towards bankruptcy. The government could not bail out the banks because it did not have the money.
The country’s bankrupt caused the government to collapse in 2009. The cause of the failure was the resignation of Prime Minister Haarde.
In 2009, Johanna Siguroardottir was elected by the citizens of Iceland. She put a restriction on investment outside the country. She also raised taxes and provided social services, debt relief to mortgage holders.
As people started investing in local businesses like real estate and private equity, tourism boomed when local prices fell because of the low currency exchange rate.
1. Learn more about the objective of the budget
2. Learn more about the revenue and expenditure
3. Learn more about the large expenditures
Grade: Middle School
Subject: Business Studies
Chapter: Global Economy
Keywords: Iceland’s economy, banks, businesses, regulation, people, GDP, gross domestic product, Netherlands and offered an interest rate, Johanna Sigurðardóttir, Iceland nationalized its largest banks, namely, Glitnir Bank, Landsbanki, and Kaupthing Bank.