Hagkerfinu

Hagkerfinu, or the economy, refers to the system of production, distribution, and consumption within Iceland. It is a small, open economy that relies on a mix of natural resources, energy-intensive industries, and a growing services sector. The economy is highly integrated with international markets, and fluctuations in global demand and commodity prices have a pronounced impact on output and employment.

The major sectors are diverse. The primary sector centers on fisheries and aquaculture, which have historically been a core export and employment base. The secondary sector includes aluminum and other metal processing industries that benefit from abundant renewable energy, and some manufacturing activity. The tertiary sector has expanded significantly, with tourism, financial services, wholesale and retail trade, and information services playing major roles. Renewable energy, especially geothermal and hydroelectric power, provides a relatively abundant and low-cost energy source that supports industry and living standards.

Policy and institutions shape hagkerfið through monetary and fiscal instruments. The Central Bank of Iceland conducts monetary policy with a focus on price stability and financial stability. Fiscal policy aims for prudent public finances and sustainable long-term growth. After the 2008 financial crisis, Iceland implemented reforms to strengthen regulation, resilience, and economic governance, and capital controls were gradually lifted. The currency is the Icelandic króna (ISK).

Trade and integration frame the economy. Iceland participates in the European Economic Area (EEA) and is a member of the European Free Trade Association (EFTA), while not a full member of the European Union. The economy remains highly open to trade and investment, with tourism and fisheries exports as important channels of external linkages. Ongoing challenges include exposure to external shocks, price volatility in key sectors, and the need to balance growth with environmental and social sustainability.