Paying the price in Iceland

The hot springs of Iceland are not the only thing making tourists sweat, as a look at the hotel or lunch bill 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 the rest of Europe in 2018, making Iceland the single most expensive country, ahead of Switzerland (52%), Norway (48%) and Denmark (38%), according to Eurostat data. In order to avoid unpleasant surprises, a tourist, Quint Johnson, said he had done “some research” before travelling to Iceland from the United States for a week’s vacation with his family.

“But it’s been a little bit of a shock,” the 22-year-old student said, having discovered the chilling rates for familiar items like a simple hamburger with fries and a beer. A glance at the menu at an Icelandic restaurant will tell you that a plain cheese pizza will run you around 2 400 kronur – around R260 – a glass of wine will be the equivalent of at least R140 and a pint of beer costs about R110. “That’s a big price jump compared to what I’m used to,” Johnson said.

“I can get a burger and fries and beer at home for probably $12-$13 and here we’re more like $20 if not $25.”

According to the consumer price comparison site Numbeo, a dinner for two in an average restaurant comes to about R1 320, a bottle of wine in a shop is priced at around R260, and a dozen eggs cost up to R78. A small population of 355 000 coupled with a high dependence on imported goods and high taxes on alcohol all help explain Iceland’s steep prices.

“Iceland is so small. So it’s very difficult to get the same economies of scale as you have with companies in countries that are 100 times larger,” said Konrad Gudjonsson, chief economist at the Iceland Chamber of Commerce.

Regulation also plays a part. Imported products based on things like raw eggs or unpasteurised milk face significant customs barriers. Large fluctuations in the Icelandic krona in 2016-2017 have also led to a general price increase. Gudjonsson points out that there is also a “strong link between how expensive countries are and the standard of living,” and Icelanders on average do well for themselves.

In 2018, the median monthly wage for someone working fulltime was 632 000 kronur before tax (about R70 000), according to Statistics Iceland. So while the cost of living can come as a shock to tourists, most of the the locals have the salaries to match it.

“We have to take into account the level of wages in Iceland,” said Breki Karlsson, chairman of the Consumers’ Association of Iceland. “Here, we have one of the highest wages on average in Europe.”

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