Fjárhagsins

Fjárhagsins is the Icelandic term for the economy or the financial affairs of a country. In general, it refers to how a country produces, distributes, and consumes goods and services, and how income and wealth are created and allocated among people and sectors. The economy is studied in macroeconomics and is influenced by factors such as technology, institutions, policy, and global markets.

An economy comprises households, firms, and government. Markets for labor, capital, land, and goods coordinate decisions through prices. Government policy, entrepreneurship, and investment shape long-run growth and stability. In Iceland, the economy has historically combined a small, open structure with rich natural resources and a highly educated workforce.

Key sectors include services (retail, health, education, finance), tourism, fisheries, and energy-intensive industries. Energy supply from hydropower and geothermal sources supports industry and exports. The economy is highly open to trade and capital flows, making it sensitive to global demand and commodity prices.

Measurement and policy: Economists track GDP and real growth, inflation, unemployment, the current account, and public debt. The Central Bank of Iceland conducts monetary policy with an inflation target and an exchange-rate framework. The government, through the Ministry of Finance and Economic Affairs and the Alþingi, sets fiscal policy, tax rules, and public investment.

History and recent developments: Iceland experienced a severe financial crisis in 2008, the collapse of major banks, and capital controls, followed by stabilization and reforms. Tourism and services emerged as major growth drivers after the crisis, while fisheries and energy exports remain important. The economy emphasizes diversification, price stability, and sustainable growth, but remains exposed to external shocks and global commodity cycles.