PHOTO: Northern Lights in Iceland. (photo via Flickr/David Phan)
After recovering from an economic collapse, Iceland has emerged as a darling of the tourism industry. But is the current boom sustainable? A new report in the Seattle Times discusses new investment in the country.
Tourism isn’t the only sector to boom in Iceland’s economy.
“As the economy has stabilized, a jump in tourism is stoking a housing construction boom, potentially raising new risks of overheating and inflation,” Liz Alderman points out.
The country, which imposed capital controls for nearly a decade to diversify and restructure the economy, has lifted them now, and the hope is that this will spur even more investment.
“The capital controls have hit companies by deterring investment and raising borrowing costs. Their removal should help Icelandic firms that had not been allowed to invest in new operations outside the country,” Alderman reports.
It is a welcome occurrence.
“Good riddance,” Georg Ludviksson, chief executive and a founder of Meniga, a digital-banking software vendor based in Reykjavik, tells the Seattle Times. “It was hard to convince foreign investors to bring money into a country with capital controls.”
In the quest for financial security, tourism has emerged as Iceland’s largest source of revenue.
“Tourism has exploded into Iceland’s biggest industry, overtaking fishing and banking. With the number of visitors approaching 2 million a year, tourism revenue topped $3 billion in 2015, a third of the country’s export earnings. Tourism is also the single biggest employer, accounting for a tenth of jobs,” says Alderman.
While there is some concern about a new economic boom, many believe the country is in better shape.
READ MORE: When Should Travelers Visit Iceland?
“The current boom is healthier than the growth in the years leading up to the 2008 crash, which was driven by the flow of foreign funds,” said Asgeir Jonsson, an economics professor at the University of Iceland.
For more on Iceland’s growing economy and the effects of tourism, read on here.