Switzerland is no longer the most expensive: which country tops the ranking
29 May 09:12
Iceland has once again become the world’s most expensive country, overtaking Switzerland for the first time since 2018. Bloomberg reports this, citing calculations by the local trade union Viska, data from Eurostat, and the Central Bank of Iceland, according to "Komersant Ukrainian"
According to economists’ estimates, the price level in Iceland is currently three percentage points higher than in Switzerland.
This jump is attributed primarily to the post-pandemic tourism boom, rising wages, pressure on the housing market, and high food prices.
Iceland has overtaken Switzerland in terms of price levels
Iceland has regained its status as the world’s most expensive country. The last time prices in Iceland exceeded those in Switzerland was in 2018.
According to Viska union economist Vilhjalmur Hilmarsson, who used data from Eurostat and the Central Bank of Iceland, the country’s price level is currently three percentage points higher than in Switzerland.
This means that Iceland and Switzerland remain the undisputed leaders in terms of cost of living, significantly outpacing other expensive countries.
Why is Iceland so expensive?
One of the main reasons for the rise in prices was the sharp surge in tourism following the coronavirus pandemic. Tourism is one of the key drivers of Iceland’s economy, but the large influx of visitors has put additional pressure on prices.
According to Gilmarsson, it is the tourism industry that is largely fueling inflation in the service sector.
“Tourism is a huge factor in inflation in the service sector. Demand pressure from tourism has pushed wages up,” the economist explained.
Housing has become another important factor. Tourists are increasingly competing with locals for apartments and houses, particularly through short-term rentals like Airbnb.
“Another major component is housing, which has been directly affected by tourism. Tourists are competing with residents for housing, for example through Airbnb,” Gilmarsson noted.
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Food in Iceland is significantly more expensive than in neighboring countries
The high cost of living is most noticeable when it comes to food. According to Viska, food prices in Iceland are 44% higher than in other Nordic countries, which themselves are among the most expensive in the world.
The difference in the cost of basic food items is particularly noticeable:
- dairy products and eggs are 75% more expensive;
- meat is 71% more expensive;
- overall food prices exceed those of other Scandinavian countries by 44%.
This makes daily expenses in Iceland among the highest in the world, not only for tourists but also for locals.
How much do beer and coffee cost in Iceland
According to local media, a pint of beer in Iceland can cost up to 1,800 krona, which is roughly equivalent to 647 hryvnia.
A latte at a coffee shop can cost up to 1,000 krona, or about 359 hryvnia.
Such prices make even ordinary tourist expenses—coffee, lunch, drinks, or a snack—significantly more expensive than in most European countries.
High prices are already scaring off tourists
Although tourism helped Iceland quickly recover its economy after the pandemic, high prices are beginning to work against the country.
A recent study by the Icelandic Tourist Board showed that rising prices are already starting to deter some visitors.
This could pose a serious challenge for the country, as Iceland’s economy relies heavily on tourism. If travelers increasingly perceive Iceland as too expensive a destination, it could impact the revenue of hotels, restaurants, service companies, and the tourism industry as a whole.
The central bank is trying to curb inflation
Following the pandemic, Iceland experienced an economic recovery, but this was accompanied by accelerated price growth.
The country’s central bank is trying to curb inflationary pressures, but doing so is difficult due to the economy’s heavy reliance on tourism, rising wages, and pressure on the real estate market.
Economists warn that if the country continues to rely too heavily on labor-intensive industries, inflationary pressure will persist.
“In the long term, Iceland is not developing productive sectors. We are too dependent on labor-intensive industries, which will constantly create inflationary pressure. We need to build more pillars,” said Hilmarsson.
Which other countries are among the most expensive
Iceland and Switzerland are far ahead of other countries in terms of cost of living.
Luxembourg ranks next on the list of the most expensive countries. It is followed by Norway, the United States, Ireland, and Denmark.
These countries traditionally have high income levels, but at the same time, very high prices for housing, services, food, and everyday expenses.
What this means for tourists
For tourists, Iceland’s new status means that a trip to the country could end up being even more expensive than a trip to Switzerland.
Expenses can be particularly high for:
- accommodation;
- food;
- car rental;
- cafes and restaurants;
- tours;
- transportation;
- drinks and entertainment.
Those planning a trip to Iceland should carefully budget in advance, book accommodations early, and keep in mind that even basic food and drinks can cost significantly more than in other European countries.
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