WHAT IS A Nordic Tiger
Nordic Tiger is a colloquial term for the nation of Iceland. Prior to the global financial crisis of 2008, Iceland was on a strong growth trajectory that justified the "Nordic Tiger" sobriquet, with high levels of gross domestic product (GDP) growth, low unemployment and even distribution of income.
BREAKING DOWN Nordic Tiger
Nordic Tiger is another name for the country of Iceland. The Icelandic economy remains heavily dependent on fishing, which contributes 40 percent of export earnings and more than 12 percent of gross domestic product (GDP). However, the country's reliance on this sector has decreased over the years, as the economy has diversified into other areas such as software, biotechnology and tourism.
Iceland ranked first on a 2007 United Nations index of most developed countries, therefore earning the nickname Nordic Tiger. But the next year, Iceland became one of the earliest casualties of the 2008 financial crisis, and one of the world’s worst-hit economies. Much of the nation's rapid growth in the years before 2008 came after the privatization of its banking sector in the early 2000s and subsequent aggressive expansion by its banks, both nationally and overseas. The 2008 crisis triggered the collapse of Iceland's three largest banks later that year, and resulted in the economy contracting by 6.8 percent the following year.
Iceland and the 2008 Financial Crisis
Iceland's financial woes were heightened by its unusual relationship with Europe. The nation never joined the European Union, and kept its separate currency, the krona, but decided to opt into various European economic agreements. In the years prior to the 2008 crisis, as Iceland’s three big banks expanded, acquiring more property and businesses overseas, they far outpaced the Iceland central bank's capacities to regulate them or provide guarantees.
In response to the 2008 global financial crisis, many governments, including the U.S. and Australia, turned to Keynesian policies, or programs of deficit spending to boost ailing demand. Other countries, such Ireland and Greece, had no choice but to turn to austerity measures as bail-out conditions from the International Monetary Fund (IMF) and the European Union.
A new era for Iceland, fueled in part by expanding tourism, started in 2011 with positive GDP growth, and a gradually declining trend for the unemployment rate. In contrast to the majority of countries shocked by 2008 crisis, Iceland did not bail out its banks, and many economists point to Iceland as an example of what a recovery can look like when a country lets its banks fail.