Prices in Iceland are 84% higher than the European Union average in 2017, and are affecting the enjoyment tourists get out of visiting the country. This and more is brought to light in a new report from Íslandsbanki.
According to the findings of the report, prices in Iceland have increased dramatically between 2010 and 2017. In 2010, Iceland was in third place in terms of prices, and shared that position with Norway and Denmark. At that time, prices were only 32% higher than the EU average.
These price hikes cannot be solely attributed to the strength of the króna, either; Iceland’s currency increased in value by 35% from 2010 to 2017, but prices rose by 52%. The remainder of the increase can be attributed to domestic price increases rising higher than the EU average.
Most extraordinary of all is that Iceland’s price trending stands in stark contrast to most EU countries, which have on average either increased very little, stayed relatively the same, or even decreased. Íslandsbanki also believes that a lack of competition in Iceland has contributed to these price increases, as countries with a more competitive market typically experience stable or decreasing prices.
Tourism and the economy are also, perhaps unsurprisingly, inextricably linked—when tourists report that their visit to Iceland was worth the money they spent, the króna strengthens; when their satisfaction declines, the króna weakens. As it so happens, tourist dissatisfaction is rising slightly. There was a 2% increase of dissatisfaction amongst all tourists, regardless of nationality, between 2016 and last year.
All this being the case, Íslandsbanki believes there is “little to no room” for further price increases in Iceland, at least for the time being. This news comes in the wake of an announcement from ÍSAM, a major manufacturer and importer in Iceland, that they intend to raise their prices in response to a new collective agreement that increases their workers’ wages.
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