Iceland has been experiencing a tourism boom. The number of tourists visiting annually quadrupled between 2010 and 2016 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 coordinated 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.

This working paper relates to the 2017 OECD Economic Survey of Iceland (http://www.oecd.org/eco/surveys/economic-survey-iceland.htm).