Iceland is again the world’s most expensive country, surpassing Switzerland for the first time in years, calculations by a local trade union showed.
The price level in the land of fire and ice now exceeds that of Switzerland by three percentage points, said Mr Vilhjalmur Hilmarsson, an economist at the white-collar union Viska union who used data from the Eurostat statistics body and the Icelandic central bank. Icelandic prices last topped the Swiss in 2018, according to Eurostat.
The development illustrates challenges of the small Atlantic economy that is historically prone to booms and busts. A post-pandemic surge in tourism – its key growth engine – has fuelled an economic rebound and a rally in prices that the central bank is struggling to contain.
“Tourism is a huge contributor in the services’ inflation. The demand pressure from tourism has pushed wages up,” Mr Hilmarsson said. “Another big component is housing which has been directly affected by tourism. Tourists are competing with inhabitants for housing through AirBnB for instance.”
Eurostat figures for 2024, the latest available data, show the Swiss price level, adjusted for purchasing power, topping Iceland’s by more than 7 percentage points.
Food prices in Iceland exceed those in the other Nordic nations, which are also among the priciest globally, by 44 per cent, data from the union showed. Dairy and eggs cost 75 per cent more and meat was 71 per cent more expensive.
A pint of lager can cost as much as 1,800 kronur (S$18.60), and a latte in a coffee shop goes for as much as 1,000 kronur, according to local media.
A recent survey by the country’s tourism board showed higher costs are starting to deter visitors.
“In the long run, Iceland is not building up productive sectors,” Mr Hilmarsson said. “We depend way too much on labour-intensive industries which will continuously create inflationary pressure. We need to foster more pillars,” he added. BLOOMBERG
