Tourism driving Icelandic recovery

Last year, Iceland welcomed almost one million visitors. In recent years, this sector has brought more foreign currency into the country than the traditional seafood industry. “The incredible increase in tourism has definitely been a major driver out of the collapse”, says Jón Ásbergsson, CEO of Promote Iceland, in an interview with the NIB Newsletter.

Only a few years ago, the economic situation in Iceland was looking as gloomy and dark as a winter morning in Reykjavik. In 2008, the country faced the deepest economic crisis in its history as a consequence of the financial system meltdown.

“Back then we were already hoping that tourism would be one of the engines out of the crisis. However, in 2010 we were hit by another minor crisis – the eruption of the Eyjafjallajökull volcano. This stopped the flow of foreign tourists completely and Iceland was blamed for a halt in air traffic in Europe”, Mr Ásbergsson explains.

Bad publicity, best publicity

The positive side of the eruption was that it put Iceland on the map.

“The eruption brought us huge exposure in the global media. We saw this as a window of opportunity. The government and the tourism industry started a forceful campaign to show that we are open to the world”, Mr Ásbergsson explains as the darkness of the morning finally gives way to sunlight revealing that Reykjavik has received a beautiful coating of snow during the night.

World attention and the campaign brought results. During 2011–2014, the number of tourists increased by roughly one fifth every year. In 2014, the number of visitors reached 950,000, three times as much as the population of Iceland. Already in 2013, tourists brought more foreign currency into the country than the traditional seafood industry.

Mr Ásbergsson sees that there is still room for growth. According to him, the country could accommodate two million tourists per year.

“Iceland’s nature is very fragile. We have to be careful with it. We need to find ways to make sure that not too many people get too close. We need to invest in infrastructure and in measures to control the flow of tourists. It is also important to distribute visits evenly throughout the year”, he continues.

“There are two other limits to growth apart from nature: tourists and the local population. Tourists are looking for unique nature experiences. If there are too many of them around, this will suffer. The local population may also start to feel intimidated.”

Two other pillars: energy and fishing

Tourism is one of the three pillars of the Icelandic economy. The other two are the renewable energy sector and fishing. Each of these sectors accounts for roughly one quarter of export income.

“I believe that we will continue to build and develop these sectors. In the fishing industry, there are possibilities to expand on higher value-added health products and equipment. Sustainable and affordable energy is attractive for the establishment of data centres”, says Mr Ásbergsson.

“We have stable industries, a well-educated workforce and Nordic democracy with its respect for the rule of law. Even in the financial crisis, our system did not break down.”

There is, however, one reminder of the financial crisis which is still looming on the horizon like the clouds over Reykjavik.

“The remaining obvious obstacle is capital controls. This leaves us circling in a small, isolated economic system. This will damage the Icelandic economy in the long run. I hope that the government will find ways to lift these controls”, Mr Ásbergsson concludes.