Greenland - Economy
One day, Greenland’s economy may benefit from its mineral riches (among others, it has the third largest deposit of uranium in the world), which has drawn increased interest from large multinationals. However, for the time being, this Arctic territory is highly dependent on subsidies from Copenhagen, which supplies more than half of its budget. While the fishing industry has helped Greenland achieve comfortable annual growth rates of 6 percent and more, the territory has failed to reduce its dependency on subsidies from Denmark.
Although the Self Rule Act provides for the first time a mechanism for independence, such a decision is dependent on development of a sustainable economy. Much depends on the extent of Greenland's actual natural resource base and the speed with which it can be developed. A 2007 US Geological Survey study estimated significant probabilities of oil and gas reserves of approximately 31.4 billion barrels off Greenland's eastern coast. If realized, these reserves could make the region the 19th largest hydrocarbon reserve in the world, on par with Alaska's North Slope. Greenland's western waters could also yield additional billions.
The public sector, including publicly owned enterprises and the municipalities, plays the dominant role in Greenland's economy. A large part of government revenues comes from Danish Government grants, 57% in 2009, an important supplement of GDP. The global economic slowdown is affecting Greenland as well, and a contraction of 2% of GDP is expected for 2009. The surpluses in the public budget between 2002 and 2005 were turned to a deficit of $40 million in 2007 and 2008, and unemployment is on the rise after an extended period from 2003 onward with lower unemployment.
The Greenlandic economy increased by an average of 3% to 4% annually between 1993 and 2001, the result of increasing catches and exports of shrimp, Greenland halibut, and, more recently, crabs. However, it was not until 1999 that the economy had fully recovered from an economic downturn in the early 1990s. During the last decade the Greenland Home Rule Government (GHRG) has pursued a fiscal policy with mostly small budget surpluses and low inflation, but increased public pressure for improved public services in the form of better schools, health care, and retirement schemes have strained the public budget. The GHRG has taken initiatives to increase the labor force and thus employment by, among other things, raising the retirement age from 60 to 63 years. The average unemployment rate for 2008 was 4.5%. Structural reforms are still needed in order to create a broader business base and economic growth through more efficient use of existing resources in both the public and the private sector.
Due to its continued dependence on exports of fish, 85% of goods exports, Greenland's economy remains very sensitive to foreign developments. Greenland has registered a foreign trade deficit since the closure of the last remaining lead and zinc mine in 1989, though international interest in Greenland's mineral wealth is increasing. The trade deficit reached 12% of GDP in 2007. International consortia are also increasingly active in exploring for hydrocarbon resources off Greenland's western coast, and there are international studies indicating the potential of oil and gas fields in northern and northeastern Greenland. The U.S. aluminum producer Alcoa in May 2007 concluded a memorandum of understanding with the Greenland Home Rule Government to build an aluminum smelter and associated power generation facility in Greenland to take advantage of abundant hydropower potential. Tourism also offers another avenue of economic growth for Greenland, with increasing numbers of cruise lines now operating in Greenland's western and southern waters during the peak summer tourism season.
The autonomous region has undeveloped mineral and petroleum resources; exploration activities for both were picking up in 2004. Some Canadian mining companies were active in exploring for diamond and gold, and as a result, a gold deposit was being developed and mined in South Greenland. Skaergaard Minerals Corp., which is 100% owned by Galahad Gold plc of the United Kingdom, planned to develop the gold-palladium-platinum deposit at Skaergaard in eastern Greenland. The inferred mineral resource contained 1.09 million kilograms of palladium, 339,000 kilograms (kg) of gold, and 93,300 kg of platinum with substantial accessory metals, such as titanium and vanadium.
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