The Icelandic economy and Game of Thrones: Just what the maester ordered
Iceland is known for its natural picturesque beauty, active volcanos, the northern lights and of course its friendly people. In fact, the country was recently named the friendliest country in the world by the World Economic Forum. However, the one black spot on the country’s nearly spotless record was the 2008 Icelandic banking crisis that left the country’s economy on the verge of complete collapse.
In 2008, all three of Iceland’s major privately owned commercial banks failed and the country’s stock market lost 80% of its value overnight. Brought on by the deregulation of banks in 2001, years of asset inflation and bad loans resulted in a national debt 10 times that of its GDP. The banks eventually defaulted resulting in the largest single banking collapse in world history.
With the economy teetering on the edge after the disaster, the government took emergency measures to get the economy back on its feet and stabilize the Icelandic krona. Nearly 10 years later Iceland has been called a European success story as its economy is now looking like a world beater. The country is on track to be the fastest growing economy among OECD member countries in 2017. And a lot of this is down to the recent boom in tourism and specifically, the hit HBO TV series, Game of Thrones.
Game of Thrones is, at the very least, partly responsible for the major uptick in tourism growth in recent years. Many of Iceland’s glaciers, lakes and national parks serve as the backdrop for the “lands beyond the wall” and the popularity of the show has given rise to massive increases in tourism, as the show’s many diehard fans from around the world make pilgrimages, so to speak, to visit the show’s popular filming locations.
Iceland received a record 1.8 million visitors in 2016, which was a 40% jump over the previous year, while 2015 saw a 30% annual increase. As a result, the booming tourism sector is widely regarded as the reason for the country’s recent surges in economic growth. In 2016, the economy grew a very impressive 7.2%, while the final quarter growth in 2016 came in at 11.9%. FocusEconomics is currently projecting Iceland's economy to grow 5.4% in 2017, which is slower than 2016, but is still nothing to sniff at.
However, with all the good news comes some bad news. Although the economy is poised to grow robustly this year largely on the back of the tourism sector, the Icelandic krona has appreciated massively as a result, prompting Bloomberg Markets to declare, “Game of Thrones crowns the Icelandic krona the world’s best currency.” But, a rapidly appreciating currency has the Icelandic Central Bank worried. The Sedlabanki has gone to great lengths to slow the krona’s gains amid concerns that the appreciation could see inflation targets missed and hurt exports. However, various rate cuts, the lifting of capital controls and foreign exchange purchases have done little to erode the appeal of the currency and curb the gains.
Indeed, fears over tourism have surfaced. The fishing industry’s output has lagged due largely to the strength of the krona, while tourism is affecting housing and rental prices, and the overall cost of living, as prices for staple goods rise due to significantly increased demand. Moreover, the IMF commented recently that although the economy is doing well, risks of overheating are a clear concern, while the Central Bank governor stated that the pace of economic growth has become slightly worrisome.
Tourism is projected to come in at 2.4 million visitors this year. That is about seven times the population of the tiny country and it has put a strain on public services and infrastructure. There have been reports of tourists needing to be saved from dangerous excursions as they visit remote parts of the country, and others needing to relieve themselves in the streets as public rest rooms are in short supply. The Icelandic healthcare system has also been put under pressure, as it cannot cope with the amount of people in the country.
Despite these issues, it would be hard to overstate the importance of tourism to the Icelandic economy and the role it played in pulling the economy out of the doldrums. Tourism was just what the maester ordered for the ailing economy when it needed it most. For those that are worried about an overheating economy and the strong krona, this should help to curb the tourism going forward by making it pricier for foreign visitors which should lead to lower prices by reducing demand.
From this point on, it’s important for Iceland to strike a balance. Most important, however, is that it does not appear that winter will be coming for the Icelandic economy any time soon.
5-year economic forecasts on 30+ economic indicators for 127 countries & 33 commodities.
Date: September 19, 2017
TagsUSA Company News Healthcare Mexico Tunisia Brazil MENA Oil South Africa Housing Market France precious metals UK Turkey Agricultural Commodities Commodities Argentina Australia European Union Emerging Markets Germany Infographic Latin America Cryptocurrency Russia Investment Nordic Economies G7 Eastern Europe Gold Euro Area Africa Sub-Saharan Africa Vietnam Consensus Forecast Forex Greece Unemployment rate OPEC Inflation Italy Colombia United States Venezuela Canada Bitcoin Portugal Energy Commodities Asia Japan Banking Sector Spain oil prices China Brexit Exchange Rate Economic Growth (GDP) TPP United Kingdom Major Economies IMF Base Metals Commodities Iran India Trade Precious Metals Commodities Ukraine
The most recent estimates suggest that the Angolan economy is getting back on its feet. Read more: https://t.co/E1QrCcf8pe
10 hours ago
India is projected to grow 7.3% in FY 2018 and 7.4% in FY 2019. https://t.co/JNeqoY4fcN
10 hours ago
How will general elections in Malaysia affect the economy in 2018? Find out: https://t.co/wxJTHWfmrk
12 hours ago
Incoming economic data remains largely encouraging in India. Read our latest economic outlook for India here:… https://t.co/WRPhonAiNx
12 hours ago
Tighter monetary stance and ebbing Chinese demand to cause growth to moderate in Malaysia this year. Read more: https://t.co/wxJTHWfmrk
13 hours ago
- What the TPP means for trade in Latin America
- How Student Loan Debt Affects the Economy
- Elections in Russia: Analysis and Implications
- 2018 & 2019 Economic Outlook for the Top Oil Producing Countries
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- The Poorest Countries in the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Gold: The Most Precious of Metals (Part 3)
- Venezuela's Electoral Conundrum
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- China’s growing influence on the Latin American economy
- Top Economics & Finance Blogs of 2018
- How Latin America emerged from recession in 2017
- Is this the beginning of the end for Bitcoin?
- Risks and Opportunities for 2018 - Daniel Lacalle
- Emerging Markets 2018 Economic Outlook
- The role of FDI in Vietnam’s socio-economic development
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- The World's Top 10 Largest Economies
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit