2019 OECD Economic Surveys: Iceland 2019

image of OECD Economic Surveys: Iceland 2019

Iceland has rapidly caught up with the richest OECD economies. Favourable external conditions and good policies helped create inclusive growth, low unemployment, low inflation, and sustainable public finances. The economy is very egalitarian, and living standards are among the highest in the OECD. Yet growth is now turning sharply due to a rapid decline in tourist arrivals and weak marine exports, with growth projected to slow to around zero in 2019. Wages are rising faster than productivity and the competitiveness gains, achieved after the 2008 crisis, are exhausted by now. Regulation is stringent. The government should set up a comprehensive action plan for regulatory reform, prioritising reforms that foster competition, level the playing field between domestic and foreign firms and attract international investment. Linking wages more closely to productivity developments could also help maintain competitiveness. A comprehensive skills strategy that builds strong foundation skills and provides the right skill mix would help Iceland to prepare for rapid technological change. The quality of public spending has declined since the 2008 crisis. Providing a better nexus between spending and performance targets in various policy areas could help increase public sector effectiveness.


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Basic statistics of Iceland, 2018

(Numbers in parentheses refer to the OECD average)

The economic situation and policies of Iceland were reviewed at a meeting of the Economic and Development Review Committee on 13 June 2019. The draft was revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 12 July 2019.The Secretariat’s draft report was prepared for the Committee by Hansjoerg Bloechliger and Vassiliki Koutsogeorgopoulou under the supervision of Piritta Sorsa. The draft has benefitted from consultancy work by Olga Rastrigina and Daniele Pacifico  and valuable background research by Laura Brogi.Statistical research was provided by Anne Legendre. Assa Fofana formatted and produced the layout.The previous Survey of Iceland was issued in June 2017.


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