THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Iceland

Ranked 14th of 149

At a glance

Ranks

14 th on the Legatum
Prosperity Index™

18th
17th
12th
28th
22nd
4th
4th
5th
17th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Iceland performs best on Safety & Security and Personal Freedom and scores lowest on the Education sub-index.

Visit our Rankings table to see how Iceland compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Iceland has consistently delivered a prosperity surplus that has placed it among the world’s best over-deliverers. Its current surplus ranks it at 14th globally. Its surplus narrowed over the crisis, and remains at a slightly lower level now than it was in 2007.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

Iceland has yet to recover from the 2008 economic crisis. It surpassed its 2008 level of GDP in 2014, but other problems remain. Iceland’s unemployment rate went from 2.3% in 2007, peaking at 7.6% in 2010, and dropping to 5% in 2016, still more than double its pre-crisis level. The most substantial problems with Iceland’s Economic Quality, however, came with its policy response to the crisis: it took an inward turn, most strongly exemplified by its institution of capital controls in 2008. The effectiveness of Iceland’s anti-monopoly policy has deteriorated sharply since the crisis while the prevalence of non-tariff trade barriers in the economy has increased.

Consequently, Iceland’s Business Environment has deteriorated. It is, unsurprisingly given the capital controls, harder to access credit in Iceland now than it was before the crisis and fewer people think their local area is a good place to start a new business.

Iceland’s Economic Quality and Business Environment has yet to recover from the 2008 crisis, holding back overall prosperity.
Iceland’s Economic Quality and Business Environment has yet to recover from the 2008 crisis, holding back overall prosperity.

Iceland has experienced a considerable decline in its Health ranking, going from 4th place in 2011 to 22nd place in 2016. This sharp drop is accounted for by deterioration in Icelandic citizens’ mental health and in their subjective views of healthcare provision. Fewer citizens have reported recent experience of joy and more have reported recent experiences of sadness, both of which are perhaps related to the strains caused by the crisis. There are greater numbers of Icelandic citizens who are reporting health problems and dissatisfaction with their local healthcare systems. The latter is undoubtedly crisis-related. The country’s healthcare system is buckling under the pressure of budget cuts and a brain drain of medical talent. In the summer of 2015, Iceland’s nurses union organized a strike to protest against long working hours and low wages.

Iceland’s high level of overall prosperity is accounted for by structural factors: high levels of Personal Freedom, Safety & Security, and Social Capital, in particular. Its performance among the more variable components of prosperity has been holding it back. The crisis affected Iceland’s Economic Quality and Business Environment badly, and these effects are spilling over into other areas like Health. Improving prosperity in Iceland requires addressing these issues.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.