Holmes Institute: International Trade & Enterprise Report Analysis

This report provides an in-depth analysis of international trade and enterprise, focusing on the economies of Iceland, the Bahamas, and Malta. The study explores the relationship between population and economic growth, examining how GDP impacts industries and the standard of living in these less-populated countries. The report highlights the key economic sectors, including services (particularly tourism), manufacturing, and financial services. It compares GDP, industry development, and terms of trade, revealing the unique economic characteristics of each nation. The analysis includes data from 2007 to 2017, showcasing trends and impacts of the global financial crisis, and assesses the influence of trade on living standards. The report also considers the role of government regulations and free trade agreements in shaping the economic landscape of these nations. Overall, the report provides a comprehensive overview of the economic dynamics in these three nations, offering insights into the factors driving their growth and development.

Running head: INTERNATIONAL TRADE & ENTERPRISE
International Trade & Enterprise
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Executive summary
Economic growth of a nation depends on many macro as well as micro economic variables.
Gross Domestic Product (GDP) reflects the economic growth of a nation and the GDP per capita
is often beneficial to highlight the quality of life as well as economic conditions, such as,
inflation, unemployment etc. However, GDP per capita does not indicate the level of actual
production as population plays a major role in determining GDP per capita. This report focuses
on three less populated countries, Iceland, the Bahamas and Malta to highlight the differences in
the economic growth, industry development, terms of trade and standard of living in those
nations. It is found that all the three countries have high GDP per capita, however, the level of
economic growth are quite different.

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1. Introduction
Population growth and economic growth have a controversial relationship. On one hand,
high economic growth and low population leads to high GDP per capita, on the other hand, high
population growth in the low income nations often results in economic and social problems, and
in countries with high population growth and low income or economic growth, the development
gets slowed down (Coale and Hoover 2015). Migration has ambiguous impact on economic
growth and GDP per capita depending on the existing condition of population in the country. As
highlighted by Peterson (2017), limited migration and lower population growth may contribute
in the increased domestic as well as global economic inequality.
This report will highlight the comparison and similarities of three less populated
countries, namely, Iceland, Bahamas and Malta, in terms of GDP, terms of trade, industries, and
effects of population and GDP on the standard of living. The purpose of the report is to explore
the relationship between the economic growth and population in the context of less populated
country and the effect of GDP or economic growth on the industries and standard of living in
those countries. Three less populated countries will be examined as there is uncertain effect of
population on the economic growth and per capita GDP.
2.0 Discussion
2.1 Country overview
2.1.1 Iceland and its economy
As per the global census data of 2018, the population of Iceland is 331778, population of
Bahamas is 392718 and the population of Malta is 419615 (Pariona 2019). These three countries

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fall in the list of 30 least populated countries of the world. Iceland, situated at the northern part of
Europe, has a small economy which is subject to high volatility. In 2017, the nominal GDP of
Iceland was 23 billion USD, and in 2018, the GDP growth rate was 4.6% (World Bank 2019).
Figure 1: GDP of Iceland, 2007-2017
(Source: World Bank 2019)
With a population less than 0.35 million, the per capita GDP is very high in Iceland,
which is around $67,500 million (nominal) in 2017 and in terms of purchasing power parity
(PPP), the GDP per capita was $52,500 (World Bank 2019). As population is extremely low, the
level of unemployment is low too and it stands at 1.7% at March 2017. This is also followed by a
stable and low rate of inflation, that is, 1.7%. The major economic sectors of Iceland are
services, industries and agricultures, among which services contribute maximum to the economy.
Among the service industry, tourism has become one of the largest service sectors since the past

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10 years (Sigurðardóttir and Helgadóttir 2015). In 2017, tourism sector has contributed more
than 10% of the GDP through revenue as well as job creation.
2.1.2 The Bahamas and its economy
The Bahamas is the second less populated country that is considered in this report. It is
the wealthiest country in the West Indies and third wealthiest in the Americas. It has a stable
developing economy, with a population of 392718 as of 2018. In 2017, the nominal GDP at the
current USD was 12.2 billion, which expanded by 2.5% in 2017 (Tradingeconomics.com 2019).
It ranks 133 among the 196 countries in the GDP ranking. Due to very low population, the per
capita GDP of the Bahamas is quite high. It was $32,661 in 2017. However, in 2007, the GDP
per capita in the Bahamas was $32,147 surprisingly (countryeconomy.com 2018).
Figure 2: GDP of the Bahamas, 2007-2017
(Source: World Bank 2019)

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The economy is largely dependent on the service sectors, followed by agriculture and
other industries. Among the services, the largest is the tourism and financial services, especially,
the offshore banking (Witter 2017). The major industries are cement, oil, salt, pharmaceuticals,
transshipment, etc. In the past decades, there has been a significant increase in the international
tourism, and that has led to the construction of infrastructures like accommodations, roads and
transport, restaurants, water, sanitation, electricity etc. Financial services contribute around 15%
in the economy’s GDP. However, due to financial regulations imposed by the government, many
international businesses have left the Bahamas. On the other hand, agriculture and manufacturing
contribute around 10% of the GDP and both have slow growth despite having government
incentives (Haas, Fedler and Brooks 2017). Another new service industry is now growing in the
Bahamas now is the e-commerce.
2.1.3 Malta and its economy
The third country in this discussion is Malta. It has a population of around 419615 as of
2018, which is slightly higher than the other two countries. The GDP of Malta was 12.5 billion
USD in 2017 (World Bank 2019). It has a highly industrialized, and service dependent economy,
and its main strength lies in its strategic locations. Malta has a fully developed and open market
economy (Saliba, Zammit and Azzopardi 2017). IMF also classified it as a highly advanced,
innovation driven and high income economy, thus, the market oriented economy of Malta is
heavily dependent on the trade with Europe. The major sectors of the economy are tourism,
manufacturing, and financial services. In the recent past, the rate of international tourism has
increased significantly in Malta, which is contributing in the economic growth. The GDP per
capita of Malta is $26,748 in 2017 at current USD (World Bank 2019). Along with that, the
unemployment rate is 6th lowest in the EU standing at 5.9% (Dietrich and Möller 2016). Thus,

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although it is a very less populated country, the economic growth is quite impressive and it has a
good GDP per capita.
Figure 3: GDP of Malta, 2007-2017
(Source: World Bank 2019)
From the above discussion on the overall economic condition and population of the three
countries, Iceland, the Bahamas and Malta, it is seen that all the three economies are quite
developed and service sectors are the backbone of the economies. Among the services, tourism
plays a major role, followed by manufacturing and financial services. All these countries have
quite high GDP per capita due to high economic growth and low population and it indicates that
the standard of living is quite well in all these three countries.
The GDP of these three countries are compared below with the help of a bar chart. It can
be seen from the diagram that over the 10 years of span, from 2007 to 2017, all the three
countries have a consistent growth in their GDP and economy, except that Iceland faced a rapid
fall in GDP in 2009 during global financial crisis. However, the country recovered well in the

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next years with the emergency funding from the International Monetary Fund (IMF) and some of
the European countries and 2012 onwards, the level of GDP of Iceland is quite higher than that
in the other two countries over the past decade, while the level of economic growth is almost
similar in the Bahamas and in Malta (Faisal et al. 2018). The GDP per capita is also much higher
in Iceland compared to other two countries, however, due to lower population, the comparative
GDP per capita (PPP) is higher for all these nations.
Figure 4: GDP Comparison
(Source: World Bank 2019)
2.2 Industry comparison
The economies of the countries, that is, Iceland, the Bahamas and Malta, are majorly
service based. Although the population is much less in these countries, they focus on providing
high quality services, which contributes significantly in the economic growth. The main
industries of Iceland comprises of tourism, fish processing, hydro and thermal power generation,

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aluminium smelting, etc. In the last few decades, after the growth of globalization and
technological revolution, the tourism industry in Iceland has grown substantially. The country
has exceptional and exotic natural locations and attractions that are attracting the international
tourists in a massive number. The number of international tourists grew from 488,600 in 2010 to
2,24,600 in 2017 with an average growth rate of 24.3% (Ferdamalastofa.is 2018).
Figure 5: International Visitors to Iceland 2010-2017
(Source: Ferdamalastofa.is 2018)
This has contributed a significant improvement in the economy of Iceland, as number of
employment increased as well as infrastructures got improved. The share of tourism in foreign
exchange earning increased from 26.4% in 2013 to 42% in 2017.

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Figure 6: Number of employees in activities related to tourism 2013-2017
(Source: Ferdamalastofa.is 2018)
Another important sector is the energy production and related industries and services. the
electricity needs is entirely fulfilled by the renewable energy sources and the geothermal and
hydroelectricity sector generates more electricity per capita than any other country in the world
(askjaenergy.com 2019).
In case of the Bahamas, the major industries are the tourism, financial sector or banking,
construction and pharmaceuticals. In 1999, the industrial sector contributed only 5% of the GDP
and provided 5% employment, while currently, the economy is dependent majorly on the service
sectors, such as, tourism, finance, etc. followed by agriculture and industries (Peña and Lizardo
2018). As the Bahamas is a less populated country, it focused on the development of the service
sector. The tourism industry has developed considerably resulting in growth in revenue,
employment and improved infrastructure. In 2018, the number of tourist arrivals through air, sea,

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and cruise was 6,622,015 (Tourismtoday.com 2018). This massive growth has boosted the
economy of the Bahamas which also increased the GDP per capita. It has also contributed in the
growth of the construction industry as well as financial services and in the agriculture.
Malta also has a booming economy despite having low population. It is also dependent
on the service industry. Along with tourism as a major contributor to the economic growth,
Malta has experienced a huge growth in all other types of industries, such as, food and
beverages, ship building, construction, infrastructure, consumer goods, financial services,
pharmaceuticals, and electronics. The location of the nation has helped it to establish a sea port
with advanced equipment and technology, which not only helps in tourism and shipping, but also
helped in trading of goods (Baycan and Ozen 2018).
Thus, it can be said that despite having less population, all these countries have been
successful in developing their service and other industries in the past two decades, which has
helped them to achieve economic growth and increase in the trade of goods and services,
resulting in the growth of terms of trade.
2.3 Impact on terms of trade and on the standard of living
As the industries in all these countries have developed, the level of trade have increased
substantially, which contribute in the economic growth and earning of foreign exchange. Iceland
has high level of free trade along with government regulations and intervention. Iceland and
Malta have a free trade conditions in the EU single market. In case of Iceland, 61.5% of the total
trade of goods happens with EU, followed by Norway, China and the USA (Baronchelli and
Uberti 2018).

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Figure 7: Terms of trade - Iceland
(Source: TheGlobalEconomy.com-Bahamas 2018)
Malta has experienced an increase in the terms of trade as the value of exports has
increased than the value of imports. The increase in tourism has contributed in the improvement
in the terms of trade.
Figure 8: Terms of trade – Malta
(Source: TheGlobalEconomy.com-Malta 2018)

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However, in case of Bahamas, in the past 10 years, the terms of trade have decreased, indicating
increase in imports than the exports.
Figure 9: Terms of trade - Bahamas
(Source: TheGlobalEconomy.com-Bahamas 2018)
The country has become dependent on a single sector and the USA is the largest trading
partner. Due to the improvements in the service industry within the nation, the exports of
products have reduced than the growth of the other services. For example, there is tremendous
growth of the tourism industry and hence, the number of arrival of international tourists has
increased and the inflow of foreign exchange has increased substantially, which is not reflected
in the value of the terms of trade. The level of imports is much higher in the Bahamas than the
level of exports, which has decreased the terms of trade over the years. Hence, even though GDP
per capita is quite high in the Bahamas, the total GDP is lower than the other two countries.
Quality of life indicates good work life balance, healthy life, sustainable price level,
access to education, good quality healthcare, better infrastructure along with affordable cost of

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living (McCormick 2018). As per the standard of living or quality of living index 2019, Iceland
ranks 7 with a score of 187.79, the score of the Bahamas is 126.56 and Malta scores 133.39
(Numbeo.com 2019). It has been found from the reports that the standard of living is high in all
these three countries as the per capita GDP is quite high, while it has been seen Bahamas has
particularly expensive as it is ranked as 7th most expensive country to live in (The Nassau
Guardian 2017).
Iceland has the 5th highest GDP per capita in Europe, and while adjusted for purchasing
parity, it is 29% above than the average in the EU. According to the study, Iceland has one of the
highest costs of living in Europe and it is also seen that the price of the average household
consumption is 47% higher in Iceland than the average in the EU. Iceland is preceded by only
Switzerland, where the average household consumption is 61% higher than the EU average
(Icelandmag 2017). According to an OECD report, the quality of life in Iceland is one of the
highest among the OECD countries. It has the second highest life satisfaction among the
countries under OECD, which reflects the overall quality of life. The well being in the nation
depends on various objectives macroeconomic factors or indicators such as, total GDP, GDP per
capita and subjective measures, such as, life satisfaction and level of happiness of the residents.
For example, the employment level is very high in Iceland, with 86% of people within the age
group of 15-64 are employed (Oecdbetterlifeindex.org 2019). The water and air quality are also
very high in Iceland, which contributes in achieving better and pollution free life for the
residents. Life expectance at birth is 83 years indicating a healthy lifestyle in the nation.
Moreover, the level of social networks and support for people is very high in Iceland. The cordial
relationship among people also helps to make life better in Iceland even though the cost of living

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is high, and with one of the highest GDP per capita, people can afford to live an expensive but
quality life.
On the other hand, as highlighted in The Nassau Guardian (2017), Bahamas is the 7th
among 21 most costly nations of the world to live in. As seen from the terms of trade, the import
bills in the Bahamas are significantly higher than the export bills and this result in the increase of
price for certain goods and services. The overall price level is quite high in the Bahamas and the
index score is 73 out of 100, while the index for New York City is 100 (The Nassau Guardian
2017). The imports and along with that, the cost of transport, value added tax, duties, price of
certain goods and services all contribute in the rise in the cost of living in the Bahamas. Even
though the tourism and other service industries are quite developed in the country, a high GDP
and GDP per capita make it possible for the residents to enjoy a high standard of living
compared to the neighboring countries. The cost of living can be reduced if the level of imports
is reduced and people start to consume locally grown food and other items. However, to meet the
high consumer demand for high standard of living would allow the prices and items quality to be
compromised. As highlighted by McCormick (2018), living standard is a highly subjective
factor, which is driven by desires of people than the needs.
As highlighted in the report in NB Real Estate (2017), Malta ranks 6th among 21
countries, surveyed by InterNations. The organization considered factors like leisure options,
personal happiness, travel and transport, health and wellbeing and safety and security. The
countries evaluated are Taiwan, Austria, Japan, Spain, Denmark, Costa Rica, Singapore, Czech
Republic, Switzerland, Germany, South Korea, New Zealand, Canada, France, Portugal,
Australia, Luxemburg, Finland, Ecuador, Hungary and Malta. Among these 21 countries, Malta
ranked 6th in terms of better living standard. The purchasing power index is low in Malta, while

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safety, healthcare and climate index are high. Cost of living index and property price to income
ratio are moderate (Numbeo.com-Malta 2019). The nation is a small archipelago located in the
Mediterranean. It has one of top ranked health care system, exotic locations, rich history and
culture, English speaking population, wonderful climate and advantages and facilities to become
a growing tourist destination over the years. Among the European nations, Malta has a moderate
GDP per capita and living in Malta is affordable. This has made the nation a retirement haven for
many Europeans. The overall price level is quite low in Malta which makes all facilities like
food, shelter, transport, healthcare, education affordable.
3. Conclusion
From the above discussion it can be concluded that all the three countries, that is, Iceland,
the Bahamas and Malta, have a stable economic growth and high GDP per capita as all these are
less populated. While the level of GDP and economic growth are much higher for Iceland than
the other two nations, it has been found that tourism sector has contributed significantly in the
economic development of these nations. Being less populated, these nations focused on
developing their service industries, which has improved their employment level, revenue level,
earning of foreign exchange, infrastructure development, terms of trade and quality of life.

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