2021 OECD Economic Surveys: Iceland 2021

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Iceland’s economy is recovering from a deep COVID-19 recession. Fisheries and intellectual services exports are on the rise and foreign tourists are starting to come back as travel restrictions are gradually eased. The health crisis has been relatively mild so far, thanks to a smart testing and tracking strategy and a well-functioning health system. After a sharp rise during the pandemic, unemployment is declining fast, and inflation hovers above target. Appropriate macroeconomic policy coupled with structural reforms are needed for a sound recovery and sustainable growth. The central bank should remain vigilant and fiscal support should continue to target vulnerable groups. Reducing stringent regulation, especially in tourism and construction, would help shift resources to more productive firms and jobs. Strengthening vocational education and training, and linking part of university funding to labour market outcomes would reduce labour shortages and skills mismatch. Offering better-targeted support for business R&D, encouraging the adoption of digital technologies and facilitating knowledge transfer would boost innovation and productivity. Submitting all economic sectors to carbon pricing – either a carbon tax or an emission trading system – while redistributing the proceeds to households and firms will be key for a cost-efficient and equitable transition to a low-carbon economy.


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Basic statistics of Iceland, 2019

(Numbers in parentheses refer to the OECD average)**

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 14 June 2021. The draft report was then revised in light of the discussion and given final approval as the agreed report of the whole Committee on 25 June 2021.The Secretariat’s draft report was prepared for the Committee by Hansjörg Blöchliger and Vassiliki Koutsogeorgopoulou, with inputs from Sigurður Jóhannesson and Marías Halldór Gestsson from the Institute of Economic Studies of the University of Iceland and Eunha Cho, consultant with the OECD Economics Department, under the supervision of Vincent Koen. Research assistance was provided by Natia Mosiashvili, and editorial support by Gemma Martinez and Sisse Nielsen.The previous Survey of Iceland was issued in September 2019.Information about the latest as well as previous Surveys and more details about how Surveys are prepared is available at www.oecd.org/eco/surveys


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