According to the latest data from the Conference Board, a non-profit business membership and research group, the countries most affected by the global recession in 2008 were Iceland and Ireland.
- The impact of economic crisis on these two nations was initially worsened by banking sector collapses, but later compounded by government debt and fiscal deficits.
- Iceland was the first country to face a full-scale banking crisis.
- Dozens of financial institutions folded, which also triggered an unsustainable rise in unemployment rates.
- Ireland’s economy suffered after the 2008 collapse because of its strong economic ties with the United Kingdom and United States (the latter through subprime loans). The cost of bank bailouts mounted as Europe’s debt crisis deepened. Throughout 2009, these two countries ranked at the top of lists that ranked nations according to increased risk of sovereign default or banking systems failure; they were also among those with the highest unemployment rates. By 2012, Iceland was able to reduce both its unemployment rate and government debt levels through privatizing national resources and winding down overleveraged banks, which were initially
- Iceland was particularly badly hit, with a sharp rise in unemployment and a sizable debt overhang among households says Peter DeCaprio.
- Ireland has been one of the first consequences of the GFC as its banking sector collapsed because it had become so large relative to the country’s economy, which meant that it couldn’t be bailed out by the government. In order to restore growth, it needed to reduce this debt burden, forcing a painful restructuring on creditors and depositors alike.
- As of March 2013, Iceland still has not fully recovered, with unemployment rates above 10 percent. Most importantly for the Icelandic economy, however, growth is starting to return as tourism and exports increase. Since 2010, the country has largely repaid the European Commission (EC) and International Monetary Fund (IMF) loans it received in late 2008, paving the way for a rebound in foreign investment.
- Ireland’s economy had also suffered as its banking sector collapsed because it had become so large relative to the country’s economy; thus, it couldn’t be bailed out by government. In order to restore economic growth, Ireland needed to reduce this debt burden which forced a painful restructuring on creditors and depositors alike.
- However since then Ireland has made remarkable progress due to strong exports and a resurgent housing market. By 2011, Ireland’s budget deficit and unemployment rate were under control and the country was able to contribute to European bailout funds.
- Both countries however continue to face debt problems with most of their economic recoveries driven by exports rather than domestic demand. Iceland’s government debt-to-GDP ratio is still around 100 percent while Ireland’s has fallen from its crisis peak of 120 percent in 2010 to about 95 percent in 2013. In both cases, it will probably take more years for the economies to get back on track.
- In another survey done by CNN Money, they have listed which countries had been hit harder by the recession based on GDP percentage change from the previous year:
- Iceland ranked number one, followed by Ireland and Greece.
- The United States ranked 21st while the United Kingdom ranked 9th.
- Russia was not included as it didn’t report its 2008 GDP data (the British data for that year includes 12 countries in the ranking).
- In another survey done by Forbes Magazine, it has listed which countries were hit hardest by the recession based on their annual change of unemployment rates from 2007 to 2012:
- Ireland ranked number one, followed by Greece and Spain.
- The United States ranked 8th while the United Kingdom ranked 24th. Russia was not included as it didn’t report monthly unemployment statistics during the designated time period. The only other country not to report its monthly unemployment rate was Iceland which was excluded from the Forbes list.
If the criteria used in the previous surveys are applied to these three countries:
Iceland still ranked number one and Ireland and Greece were not included on the list.
Logically, another survey should be done to find out which country has suffered most according to its people – measured by unemployment rates and poverty levels; perhaps even measuring their happiness levels, although this is unlikely given that economic factors seem to weigh heavily in such measures. There’s no way of knowing for sure but according to Icelanders, they believe it’s them (even though there is hardly any scientific basis for such a claim).
Conclusion by Peter DeCaprio:
In November 2013, Icelandic President Ólafur Ragnar Grímsson referred to Iceland as “A miracle economy” and “a different country” compared to most of the other European countries which were badly hit by the financial crisis.
Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson admitted in 2012 that he gets annoyed when Iceland is labeled as a “special case”, claiming the island nation had taken on many of the same problems facing other European countries; but he believes that Icelanders are stronger than others given that they lived through an economic collapse without suffering any riots (unlike Latvia for example).