Foreign nationals’ departures via Keflavík Airport totalled 137,000 in February, according to recently published figures from the Icelandic Tourist Board. This is roughly on a par with the same period three years ago, when the full weight of the pandemic was about to drop. The February record of 160,000 was set in 2018, which is also Iceland’s strongest year to date for tourist arrivals.
Tourists arrived in droves in February
Iceland’s 2023 tourist season has hurtled out of the starting blocks, if visitor numbers year-to-date are anything to go by. Travellers from the UK are particularly intrepid about visiting Iceland despite economic headwinds at home. Thus far, tourism-generated revenues have offset the goods account deficit and more besides, and could total as much as ISK 600bn for the year as a whole.
The bleak economic situation in the UK appears to make little impact on travellers’ appetite for trips to Iceland. British tourists accounted for almost 29% of the total for the month and were the largest nationality group, followed by Americans (15%), German and French travellers (7% each), and residents of the other Nordic countries (5%).
Chinese visitors accounted for 3% of the February total, but they have been few and far between since the pandemic struck. That could change soon, however, as the Chinese authorities have authorised the sale of package tours to over 40 countries, including Iceland. According to a report on the Icelandic National Broadcasting Service (RÚV), Chinese nationals were the fourth-largest group of visitors to Iceland in the last year before the pandemic, so presumably they will make a major difference in coming quarters as well.
Tourism-generated FX revenues set to be strong in 2023
Tourism has emerged from its pandemic-induced hibernation and regained the lead as Iceland’s biggest export sector. In 2022, export revenues related to foreign tourists totalled nearly ISK 448bn, edging out the aluminium sector (ISK 403bn) and far exceeding the fishing industry (gross revenues ISK 249bn). But it should be noted that a much larger share of export revenues from tourism and fishing will remain in the country than is the case for the aluminium industry.
According to our calculations, tourism-generated revenues probably totalled some ISK 60-70bn in January and February, whereas the deficit on goods trade was just over ISK 40bn. Naturally, there were services imports during the period, and other services – not least intellectual property- and expertise-related services – generated substantial export revenues. Currently available figures on these only extend to year-end 2022, however. Nevertheless, it is abundantly clear that tourism’s comeback makes a big difference for Iceland’s external balance.
In our macroeconomic forecast from early February, we projected that over 2.1 million tourists would visit Iceland this year. Based on that assumption, we estimate that revenues in the sector could come to around ISK 600bn in 2023 as a whole. Developments thus far and indicators of what to expect in the next few quarters support our forecast, and even hint that it might turn out on the modest side.