Iceland leads Europe as the most expensive tourist destination

Reykjavik: The hot springs of Iceland are not the only sources of sweat of tourists. A look at the bill of a hotel or lunch will tell you that most things cost more, sometimes much more, than anywhere else in Europe.

On the subarctic island, consumer prices were on average 56% higher than those of the rest of Europe in 2018, making Iceland the most expensive country, ahead of Switzerland ( 52%), Norway (48%) and Denmark (38%). Eurostat data.

In order to avoid unpleasant surprises, Quint Johnson had "researched" before traveling to Iceland from the United States for a week-long vacation with his family.

"But that was a bit of a shock," a 22-year-old student told AFP after discovering the frightening rate of familiar food consumption, such as a simple hamburger with fries and a beer .

A look at the menu of an Icelandic restaurant will tell you that a simple cheese pizza will cost you around 2,400 crowns – around 17 euros ($ 19) – a glbad of grape costs at least 10 euros and a pint of beer costs around 7 euros. .

"It's a big price jump compared to what I'm used to doing," Johnson said.

According to the Numbeo price comparison, a dinner for two in an average restaurant ends with a bill of about 85 euros, a bottle of grapes in a shop costs around 17 euros and a dozen eggs cost up to 39 to five euros.

A small population of 355,000, a heavy reliance on imported products and high taxes on alcohol help to explain Iceland 's high prices.

"Iceland is so small, so it is very difficult to achieve the same economies of scale as businesses with 100 times larger economies," said Konrad Gudjonsson, Chief Economist. at the Icelandic Chamber of Commerce.

Regulation also plays a role and imported products based on things such as raw eggs or unpasteurized milk face significant customs barriers.

Sharp fluctuations in the Icelandic krone in 2016-17 also resulted in a general price increase.

Gudjonsson points out that there is also a "close link between the high price of countries and the standard of living" and that Icelanders generally get it right.

In 2018, the median monthly salary of a person working full time was SEK 632,000 before tax (about 4,450 euros), according to Statistics Iceland.

Thus, while the cost of living can shock tourists, the locals have the corresponding salary.

"We have to take into account the level of wages in Iceland – here we have one of the highest wages in Europe," said Breki Karlsson, president of the Icelandic Consumers' Association.

But according to forecasts from the central bank, Iceland is heading towards more difficult times. The economy is expected to contract by 0.4% in 2019, which would be the first time that it would shrink in ten years.

Statistics Iceland also lowered its outlook in May. It is now forecasting a contraction in GDP of 0.2% after forecasting growth of 1.7% for the year in February.

The worsening outlook is partly attributable to the decline of the island's off-standard tourism industry, which has been exacerbated by the collapse of the Icelandic low-cost carrier WOW air.

Meanwhile, the fishing industry has been affected by a sudden disappearance of capelin in Icelandic waters, leading the government to stop issuing fishing quotas in 2019 for economically vital fish. .

At the same time, inflation has increased, reaching 3.1% in the first quarter of the year, "thereby reducing the purchasing power of everyone," said Gudjonsson of the Chamber of Commerce .

The bright side is that he thinks the looming recession could help reduce real estate prices, which have risen in recent years due to a shortage.

"An increase in consumer goods and services, but a decrease in housing costs," said Gudjonsson.

The current average rent of a one bedroom apartment in the center of Reykjavik is about 1,300 euros a month.