Iceland is an island country located between North America and Europe in the Atlantic Ocean, near the Arctic Circle, with an advanced economy that centers around three primary sectors: fisheries, tourism, and aluminum production. Until recently, U.S. investment in Iceland has mostly been concentrated in the aluminum sector, with Alcoa and Century Aluminum operating smelters in Iceland. U.S. portfolio investments in Iceland have been steadily increasing in recent years. Iceland’s convenient location between the United States and Europe; its high levels of education, connectivity, and English proficiency; and a general appreciation for U.S. products make Iceland a promising market for U.S. companies. Americans made up a third of the tourist population that visited Iceland in 2022.
There is broad recognition within the Icelandic government that foreign direct investment (FDI) is a key contributor to the country’s economic prosperity. As part of its investment promotion strategy, the Icelandic government operates a public-private agency called “Invest in Iceland” that facilitates foreign investment by providing information to potential investors and promoting investment incentives. Iceland identifies the following as “key sectors” in Iceland: tourism, food and natural products, data centers, energy and green solutions, innovation, fisheries, creative industries, and life sciences. Iceland offers incentives to foreign investors in certain industries.
Tourism has been a growing force behind Iceland’s economy in the past decade, with opportunities for investors in high-end tourism, including luxury resorts and hotels. The number of tourists in Iceland reached more than 2.3 million in 2018. Tourism in Iceland contracted in 2019 and 2020 due to COVID-19, and the total number of tourists went down to 2 million in 2019 and then down to 486,000 in 2020. As of 2022, the tourism sector has fully recovered, with 698,000 tourists in 2021, around 1.8 million tourists in 2022, and a projected number of 2.3 million tourists expected for 2023.
The startup and innovation communities in Iceland are flourishing, with the information technology and biotech sectors growing fast, particularly pharmaceuticals and wellness, gaming, and aquaculture. Iceland’s IT sector spans all areas of the digital economy. The Icelandic energy grid derives 99 percent of its power from renewable resources, making it uniquely attractive for energy-dependent industries.
Iceland’s 2018 Climate Action Plan was updated in 2020 and is designed to achieve Iceland’s national climate goals of making the country carbon neutral by 2040 and cutting greenhouse gas emissions by 40 percent by 2030 under the Paris Agreement.
Russia’s war of aggression against Ukraine affected Iceland less than neighboring countries. Inflation has steadily risen since the invasion, as consumer product prices and gas prices continue to increase.
|TI Corruption Perceptions Index||2022||14 of 175||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2022||20 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2021||$878||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2021||$63,460||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|