Iceland has been named the most expensive country in the world, surpassing Switzerland for the first time in recent years, according to the latest analysis by the country's local trade union.
According to Viska economist Vilhjalmar Hilmarsson, price levels in Iceland are now about three percentage points higher than in Switzerland. The last time Iceland surpassed Switzerland in the ranking was in 2018.
The current ranking of the most expensive countries in the world sees Iceland in first place, followed by Switzerland in second place, Luxembourg in third place, Norway in fourth place and the United States completing the top five countries.
The increase in the cost of living in Iceland is seen as a result of the surge in the tourism sector after the Covid-19 pandemic, which has become the main driver of the country's economic growth.
The tourism boom has not only increased demand for local services, but also put pressure on housing prices and worker wages.
The effect has become more pronounced as tourists begin to compete with locals for accommodation, especially through short-term rental platforms such as Airbnb.
The situation has made inflationary pressures in Iceland increasingly difficult to control, even as the country's central bank continues to try to stabilize the economy.
Eurostat data for 2024 previously showed that Switzerland was still ahead of Iceland in terms of price levels after adjusting for purchasing power. However, current economic developments have seen Iceland return to the top spot.
At the same time, the latest survey by the Icelandic tourism board shows that excessive cost increases are starting to affect the presence of foreign tourists.
Economists also believe that Iceland is overly dependent on labor-intensive sectors such as tourism, thus causing inflationary pressures to continue to increase.
The situation has prompted calls for Iceland to develop more new economic sectors to reduce its dependence on the tourism industry alone.
