Reinvigorating growth to maintain high living standards
Reykjavik 26 June 2025
https://oe.cd/iceland
Source: OECD, National Accounts database.
Robust growth will resume
Source: OECD Economic Outlook database.
Increasing the effectiveness of fiscal policy
An expenditure rule and spending reviews could improve fiscal balances
Government balances
Note: The underlying budget balance adjusts for cyclical developments and one-off fiscal operations.
Source: OECD Economic Outlook database.
Fiscal savings would ensure that the downward trajectory for public debt is maintained
Fiscal package recommendations
Note: Debt projections until 2030 follow the government’s proposed fiscal plan. The baseline reflects rising current tax and spending with a build-up of ageing costs stemming from state pensions, public health and long-term care spending, assuming an unchanged replacement rate for state pensions. The “fiscal package” line portrays the fiscal effects of recommended reforms, including reducing value-added tax exemptions, increasing the effective retirement age, and strengthening work incentives.
Source: OECD, Economic Outlook database; OECD, Long-Term Model; OECD calculations.
Note: OECD refers to the simple average of the countries for which data are available. Source: OECD, Global Revenue Statistics database.
Reforming regulatory frameworks
Productivity growth has declined significantly, and needs to be reinvigorated
Source: OECD Economic Outlook database.
Lower administrative and regulatory burdens would boost business creation
OECD Product Market Regulation indicator, overall index
Score: 0 (least restrictive) to 6 (most restrictive), 2023
Note: The OECD Product Market Regulation indicators measure the degree of regulatory stringency in goods and services markets.
Source: OECD Product Market Regulation indicators.
Reducing stringent regulations would unlock greater competition in network sectors
OECD Product Market Regulation indicators: Network sectors
Score: 0 (least restrictive) to 6 (most restrictive), 2023
Note: The OECD Product Market Regulation sector indicators assess regulatory barriers to firm entry and competition at the level of individual sectors. The Nordic countries average refers to the simple average of the respective scores for
and
Source:
Reforming foreign direct investment screening would make Iceland more attractive to foreign investors
OECD Foreign Direct Investment Regulatory Restrictiveness Index Score: 0 (open) to 1 (closed), 2023
Note: The OECD Foreign Direct Investment Regulatory Restrictiveness Index measures statutory restrictions on foreign direct investment across 22 economic sectors. Data reflect regulation in force as of end-December 2023. Source: OECD Foreign Direct Investment Regulatory Restrictiveness Index.
Streamlined customs procedures would promote international trade
OECD Trade Facilitation indicator
Average across 11 policy categories, Score: 0 (worst) to 2 (best), 2024
Source: OECD Trade Facilitation indicators. 1.5 1.6 1.7
Note: The OECD Trade Facilitation indicator measures policies that streamline and simplify technical and legal procedures for products at the border and consist of 11 policy categories. The chart shows the average score across the 11 policy categories.
Insolvency regimes should be made more flexible to facilitate early debt resolution
OECD insolvency indicator
Average across 3 policy categories, Score: 0 (best) to 3 (worst), 2022
Note: The chart shows the overall score from the OECD insolvency indicator.
Source: André and Demmou (2022), “Enhancing insolvency frameworks to support economic renewal”.
Lifting foundational skills
A strong reform push is needed to improve students’ skills
Source: OECD, PISA 2022 database. PISA stands for Programme for International Student Assessment.
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Strengthening the teacher competency framework would enhance teachers’ skills and teaching quality
Teachers in lower secondary schools who have an advanced education degree1
% of teachers, 2018
1. Advanced education degree corresponds to master’s, doctoral or equivalent (International Standard Classification of Education (ISCED) levels 7 and 8). Canada refers to the province of Alberta, and OECD to the simple average of the countries for which data are available.
Immigrant students need more and better language training
Score-point difference in reading performance associated with immigrant background 2022
Note: Score-point difference before accounting for students’ socio-economic status and language spoken at home. Immigrant students are students whose parents were both born in a country/economy other than that where the student took the PISA test.
Source: OECD, PISA 2022 database. PISA stands for Programme for International Student Assessment.
Powering the electricity sector
Faster licensing and permitting would help accelerate new electricity projects
OECD Product Market Regulation indicators: licences and permits
Score: 0 (least restrictive) to 6 (most restrictive), 2023
Note: The chart summarises the scores for all the items related to licences and permits under the category “communication and simplification of administrative and regulatory burden” in the OECD Product Market Regulation indicators.
Source: OECD calculation based on the OECD Product Market Regulation indicators.
Main messages
Regulatio n Fiscal Electricity
Introducing an expenditure rule and carrying out spending reviews would increase effectiveness of the public finances
Reducing administrative and regulatory burdens is central to enhance business dynamism and boost productivity growth
A comprehensive initiative to improve school education is necessary to lift foundational skills
Expanding electricity generation and transmission is needed to maintain energy security Education
Disclaimers:
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.