A Dynamic and Resilient Economy

The Faroese business sector is gradually becoming more diversified. Nevertheless, there is no getting around the fact that the Faroese are a seafaring people: the areas of expertise par excellence are still the ocean and associated fields of knowledge – fisheries, shipping, navigation, aquaculture, oceanography, marine biology and biotech as well as marine related engineering and physics. The ongoing work within these fields in the Faroe Islands is recurrently pioneering.

The Faroe Islands is a small open economy where the fishing industry for decades has been the major driver. The Faroese fishing industry is diversified and in constant development. The industry covers a range of various areas, spanning over e.g. pelagic fishery, demersal fishery, in Faroese as well as distant waters, and the fish processing industry. Furthermore, the Faroese fish farming industry has gained cutting-edge know-how in the field of aquaculture and is one of the most sustainable and profitable aquaculture industries in the world. Fishing and its related industries account for around 20 per cent of the gross value added to the Faroese economy. The fish industry employs approximately 15 % of the labor force.

Fluctuations in growth rates between years is a typical feature of the economy due to both its limited size and the great dependency on the exports of fish products, accounting for between 90 and 95 percent of total exports value. Other important and promising industries include financial services, petroleum related businesses, shipping, manufacturing (esp. servicing the maritime industries), civil aviation, IT and telecoms, creative industries and tourism. Some are already well established, while others – e.g. some creative industries – are up and coming.

The Faroe Islands have a well established financial sector constituted by four banks, two insurance companies, two life insurance companies and some public funds. The Faroese banks are under the supervision of The Danish Financial Supervisory Authority and liquidity is on the whole quite good in the Faroese banking sector. The currency of the Faroe Islands is the Faroese króna, issued by the Danish National Bank, and with the same value as the Danish Krone.

Faroe Islands is ranked among the highest in the world based on GDP per capita. From 1998 to 2015 the Faroese GDP has more doubled from 7,4 billion DDK to 16,7 billion DDK.

The Faroese economy has performed comparatively well over the last years in a time dominated by the global financial crisis. Annual growth in nominal GDP was 7,5 percent in 2014 and 5,6 percent 2015. The crisis that hit the global scene in the fall of 2008 also affected the Faroese economy, which saw a rise in unemployment from 1.5 % in 2007 to 7.4 % in 2010. However the dynamic and resilient Faroese economy has, as a whole, stabilized. Unemployment was by September 2012 down at 5.1 % and in May 2017 the rate is down at 2,0%. To a large degree the positive trend owes to the growth in salmon farming and pelagic fisheries.

The Faroe Islands has entered into a number of Free Trade Agreements and agreements on fishing rights with neighbouring countries, among them the European Union, as the Faroe Islands is not a member of the EU. In 2006, the Faroe Islands entered into a special economic treaty with Iceland, the Hoyvík Agreement, which established a single economic area encompassing both countries, with free movement of goods, services, capital and persons. In addition to the EU and Iceland, the Faroe Islands have bilateral free trade agreements with Norway and Switzerland, and a free trade agreement with Turkey is underway.

The Faroe Islands are in principle a free trader and therefore seeking the liberalisation of trade with countries worldwide. The Faroese government is currently looking into the possibilities of obtaining membership of the World Trade Organisation.