OECD Economic Surveys: Iceland

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1999-0308 (online)
1995-3240 (print)
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OECD’s periodic surveys of the Icelandic economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Iceland 2017

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27 June 2017
9789264277922 (PDF) ; 9789264277939 (EPUB) ;9789264277915(print)

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Iceland is the OECD's fastest growing economy. It has made a remarkable turnaround from the crisis, helped by booming tourism, prudent economic policies and a favourable external environment. Iceland has an egalitarian society with strong trade unions, very low inequality and high gender balance. Nevertheless, as a very small open economy Iceland is prone to boom and bust cycles. Prudent fiscal and monetary policy are warranted in the current economic boom.

The spectacular growth in tourist numbers has provided new jobs, boosted tax revenues and attracted currency inflows, but there are some growing pains with social pressures emerging. Growing tourist numbers are putting pressure on the environment, infrastructure and housing. Furthermore, the strengthening króna has created difficulties for other internationally-exposed sectors.

Iceland is the most highly unionised OECD country and the wage-bargaining system has contributed to high living standards and an inclusive society. Nevertheless, recent disruptive strikes and high wage awards have intensified inflationary pressures and threaten competiveness. Fostering trust among the social partners and increasing wage coordination would make collective bargaining more effective and help sustain the benefits of the system for future generations.


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  • Basic statistics of Iceland, 2015 or latest year available

    This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The Economic situation and policies of Iceland were reviewed by the Committee on 29 May 2017. The draft was revised in the light of the discussion and given final approval as the agreed report of the whole Committee on 8 June 2017.The Secretariat’s draft report was prepared for the Committee by Douglas Sutherland and Urban Sila under the supervision of Patrick Lenain. Damien Azzopardi provided the statistical research assistance, and Brigitte Beyeler provided the administrative support. The Survey also benefited from contributions by Julien Daubanes, Alain Dupeyras and Jane Stacey.The previous Survey of Iceland was issued in September 2015.

  • Iceland at a glance
  • Executive summary
  • Assessment and recommendations
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  • Expand / Collapse Hide / Show all Abstracts Thematic chapters

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    • Sustaining nature-based tourism in Iceland

      Iceland has been experiencing a tourism boom. The number of tourists visiting annually has quadrupled since 2010 and shows continued strength. The tourism sector is now the major export earner and is also creating new jobs and supporting new businesses. The government budget has also benefitted from high tax revenues. The surge in tourism supported growth after the crisis and the sector has become a major pillar of the economy. But, the breakneck growth of tourism has created a number of challenges. Growing pains have emerged as accommodation supply has lagged in the wake of unexpectedly large number of tourists, contributing to pressure on the local housing market. The environment, particularly in some popular sites, has also come under pressure. The government has reacted to these environmental and social impacts and has worked with the industry to agree on a path forward. Sustaining a nature-based tourism for Iceland will require more co-ordinated policy across government and a long-term strategic plan that builds on Iceland’s strengths. Protecting the unique environmental attractions of Iceland – while mitigating adverse social impacts – will lay the basis for the healthy development of a new important sector.

    • Labour market and collective bargaining in Iceland: Sharing the spoils without spoiling the shares

      Iceland has high living standards, low poverty, high inclusiveness and one of the most sustainable pension systems. It is the most highly unionised country in the OECD and, in the past, successful social pacts have protected the lowest paid workers during crises, and on occasion helped fight inflation. Nevertheless, Iceland experiences recurrent bursts of social tensions and labour unrest that often result in large wage awards, particularly in times of economic boom. Iceland is prone to accentuated economic cycles, and the pro-cyclical nature of collective bargaining aggravates these harmful dynamics.Social partners often have disagreements over what has been agreed in the past and they can have differing views on the state of the economy. Trust among the social partners has been undermined and wage co-ordination is low. There is a large number of unions, many of them very small, and wage demands are often not consistent with macroeconomic stability. Labour unrest frequently originates in the public sector as wages lag behind the private sector.Fostering trust and increasing wage co-ordination would make collective bargaining more effective and help sustain the benefits of the system for future generations. A technical committee should be established to provide reliable and impartial information to wage negotiators. Wage negotiations could start with “wage guidelines” issued by the major labour and employer confederations. State mediator should have greater powers in order to improve wage co-ordination and support the “wage guidelines”.

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