Economy of Greenland

Economy of Greenland
Nuuk, the economic hub and capital of Greenland
Rank	186rd out of 227rd
Currency	1 Danish krone (DKr) = 100 øre
Fiscal year	calendar year
Trade organisations	none
Statistics
GDP	$1.989 billion (2009 est.)
GDP growth	-2% (2009 est.)
GDP per capita	$36,500 (2008 est.)
GDP by sector	agriculture: industry: services:
Population below poverty line	9.2% (2007 est.)
Gini coefficient	NA%
Labour force	28,240 (January 2009)
Labour force by occupation	agriculture: 4.9% (2007 est.) industry: 31.9% (2007 est.) services: 63.2% (2007 est.)
Unemployment	6.8% (2007)
Main industries	fish processing (mainly shrimp and Greenland halibut); Oil, gold, niobium, tantalite, uranium, iron and diamond mining; handicrafts, hides skins, small shipyards
External
Exports	$485 million (2008)
Export goods	fish and fish products 72%, metals 10%, Other 10%, Oil 8% (2008)
Main export partners	Denmark 63.7%, 15.7% Other, Japan 12.1%, China 8.5% (2010)
Imports	$867 million (2008)
Import goods	machinery and transport equipment, manufactured goods, food, petroleum products
Main import partners	Denmark 59.5%, Sweden 20.8%, Other 13.1%, UK 6.6% (2010)
Public finances
Public debt	$58 million (2009)
Revenues	$1.47 billion (2007)
Expenses	$1.51 billion (2007), including capital expenditures of $83 million (2005)
Economic aid	$512 million subsidy from Denmark (2005)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

The Economy of Greenland can be characterized as small, mixed and vulnerable. The present economy consists of a big public sector and comprehensive foreign trade, which has resulted in an economy with periods of strong growth, considerable inflation, unemployment problems and extreme dependence on capital inflow from Denmark and use of outside, mainly Danish, skilled labour.

The economy is critically dependent on exports of fish, whaling and textiles and substantial support from the Danish Government, which supplies about half of government revenues. Unemployment remains very high and GDP per capita is similar to the average European economies.

Historical development

The effective starting point of the modern economy of Greenland was the mercantile expedition led by missionary Hans Egede, sent by the Kingdom of Denmark in 1721. This established the settlement of Godthåb and re-established Danish sovereignty in Greenland. The Danish government was initially very protective of what it considered a fragile Greenlandic culture, effectively sealing it off from international commerce and maintaining a strict monopoly on Greenlandic trade, allowing only small scale barter (troaking) with Scottish whalers.

Recent history

After World War II, reforms of the Greenlandic economy were proposed. The G-50 Report was presented in 1950 by the Danish grand commission. The commission comprised Landsrådene (the highest Greenlandic council) and Danish economists. The report outlined a program to transform Greenland from a subsistence economy to a modern welfare state. The state would be based on the Danish model, and would be sponsored by Denmark. Following this report, Greenland was made an equal part of the Danish Kingdom in 1953, and Home Rule was granted in 1979.

Greenland left the European Economic Community in February 1985, mostly due to EEC fishery policy and partly due to the EEC-wide ban on sealskin products. Effectively the only ties Greenland now has with the EU are via Denmark; most EU laws do not apply to Greenland. However Greenland enjoys preferential access to EU markets.

During the 1950s and 1960s the Danish government introduced an urbanization and modernization program, aimed at creating an urban economic environment in Greenland, by expanding the coastal towns. People from the surrounding small settlements were rehoused in hastily built houses, such as the infamous Blok P, and modern fishing practices were introduced. The program was intended to reduce costs by improving access to education and health care, and by providing employees for the cod fisheries, which grew rapidly during the early 1960s but have since effectively collapsed. This urbanization has resulted in continuing social problems, such as unemployment and alcoholism.

The Greenland economy shrank in the early 1990s, but since 1993 has grown again. The Greenland Home Rule Government (GHRG) has pursued a tight fiscal policy since the late 1980s which has helped the public budget and lowered inflation. From 1990, Greenland registered a foreign trade deficit following the closure of the Maarmorilik lead and zinc mine.

Sectors of the economy

The Greenland economy is extremely dependent on exports of fish and on support from the Danish Government, which supplies about half of government revenues.^{[citation needed]} The public sector, including publicly-owned enterprises and the municipalities, plays the dominant role in the economy.

Oil and natural resources

Deposits of many metals are known to exist. These include gold, nickel, platinum group elements, copper, lead, zinc, molybdenum, iron, niobium, tantalum, uranium, and specialty metals including rare earth elements; as well as coal and diamonds. Prospectors are currently seeking commercially viable deposits. The BMP (Bureau of Minerals and Petroleum) is promoting Greenland as an attractive destination for prospectors. Greenland was formerly the world's premier source of natural cryolite, but by the late 1980s the reserves at Ivittuut had been depleted. However, with advances in mining technology and increases in mineral prices, previously closed mines are being reopened, such as the lead and zinc mine at Maarmorilik, and the gold mine at Nalunaq.

Companies are exploring hydrocarbon and mineral deposits. There have been several offshore licensing rounds since 2002, with a number of successful bids by multinational oil companies in partnership with NUNAOIL the state oil company for blocks. Press reports in early 2007 indicated that two international aluminum companies were considering building smelters in Greenland using local hydroelectric power.

While the GHRG (Greenland Home Rule Government) has primary sovereignty over mineral deposits on the mainland, as laid down in the 2008 treaty, oil resources are within the domain of the Danish exclusive economic zone. Exploring for oil has been ongoing since the 1970s, when a series of five dry wells were drilled, and there was a further dry well in the early 2000s. In 2010 British petrochemical company Cairns Oil reported "the first firm indications" of commercially viable oil deposits.

Tourism

Main article: Tourism in Greenland

Tourism has some near-term potential, but this is limited by the short summers and high costs. Air Greenland and Continental Airlines had direct flights from the U.S. east coast from May 2007 to April 2008, but these are now discontinued.

Agriculture, horticulture and forestry

Agriculture is presently of little importance in the economy, but climate change has enabled its expansion, by obtaining higher production of existing crops, introducing new ones, and extending the cultivated areas. Roughly 1% of the total land area can be used for growing crops. Presently 10% of all potatoes consumed in Greenland are produced locally, with a projection of 15% by 2020. Due to the lengthening of the productive season new crops have been introduced, such as apples, strawberries, broccoli, cauliflower, cabbage and carrots. In southern Greenland the growing season is mid-May through to mid-September, on average three weeks longer than a decade ago.

Animal husbandry

Main article: Reindeer hunting in Greenland

Reindeer herding has been introduced to Greenland in various thrusts since 1952. Concerted attempts were made in mid-west Greenland in the 1980s and the 1990s, but these failed due to the immobility of the herds, resulting in trampled lichens and the subsequent destruction of the winter range. In 1998 mid-west reindeer husbandry came to an end, when the remaining herd was sold to the Nuuk municipality whereupon the reindeer population was removed through hunting. By then only a handful of Greenlanders had received training in reindeer husbandry, for only one of whom it was his primary occupation. The rest of the herders, roughly 20 people, were hired Norwegian Sami. When Sami supervision ended in 1978, the results were dismal; reports were sporadic and inconclusive, and herd maintenance effectively ceased with the thereby following range destruction as a result. The conclusion of the experiment was that reindeer herding and husbandry is incompatible with the Inuit hunting culture. However, in stark contrast to the mid-west, the southern herds were successful. In 2008 there was still a strong herd in the Isortoq area, centered around the Isortoq Reindeer Station. The station is maintained by Iceland native Stefán Hrafn Magnússon and Norway native Ole Kristiansen.

Today animal husbandry consists mainly of sheep farming, with free grazing flocks. Modern sheep farming methods were introduced in the early 20th century, with the first farm built in 1906. The farms provide meat for local consumption and wool mainly for export. Some 20.000 lambs are slaughtered annually in Narsaq. The lack of private land ownership rights on Greenland forces farmers to jointly agree to terms of land usage. In the south there is also a small cattle farm.

Statistics

GDP:

• official exchange rate - $1 700 million (2005)

Agriculture - products:

• forage crops, garden vegetables; sheep, reindeer; fish

Electricity - production:

• 295 GWh (2004)

Electricity - consumption:

• 274.4 GWh (2004)

Exchange rates:

• Danish kroner (DKr) per US$1 – 4.707 (2008),5.9468 (2006), 5.669 (2005), 5.9911 (2004), 6.5877 (2003), 7.8947 (2002), 8.3228 (2001), 7.336 (January 2000), 6.976 (1999), 6.701 (1998), 6.604 (1997), 5.799 (1996), 5.602 (1995)

See also

• Greenland krone
• Bank of Greenland