As reported by the news agency Bloomberg, Iceland’s price level now exceeds Switzerland’s price level by three percentage points, said Vilhjalmur Hilmarsson, an economist at the trade union Viska. In his research, V. Hilmarsson used data from Eurostat and the Central Bank of Iceland. According to Eurostat data, Iceland’s prices were last higher than Switzerland’s prices in 2018.
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“Tourism is a huge driver of service inflation. The demand pressure caused by tourism has increased wages. Another important component is housing, which has been directly affected by tourism. Tourists compete with residents for housing, for example, through AirBnB,” noted V. Hilmarsson.
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Increased expenses are starting to deter visitors.
“In the long term, Iceland is not creating productive sectors. We are too dependent on labor-intensive industries that constantly raise inflationary pressure. We need to encourage the development of more pillars,” said V. Hilmarsson.
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