Economy of the Faroe Islands

Economy of Faroe Islands

Tórshavn is the capital and largest town of the Faroe Islands
Currency	Faroese króna (pegged with Danish krone, (DKK))
Fiscal year	calendar year
Trade organisations	none
Statistics
GDP	US$2.83 billion (2017)[1]
GDP rank	166th (nominal) / 179th (PPP)
GDP growth	7.5% (2013 est.)
GDP per capita	$54,833 (2017)[1]
GDP by sector	agriculture: 16%, industry: 29%, services: 55% (2007)
Inflation (CPI)	1.3% (2019) 0.1%[2]
Population below poverty line	10.1% (2018) 0.4%[3]
Labour force	31,667 (2019)[4]
Labour force by occupation	agriculture: 10.7%, industry: 18.9%, services: 70.3% (2010)
Unemployment	1.7% in 2019 0.4%[4]
Main industries	fishing, fish processing, fish farming, small ship repair and refurbishment, handicrafts
External
Exports	DKK 9.77 billion (2019-20) 14%[5]
Export goods	fish and fish products 90%, stamps, ships
Main export partners	Russia 23.8%  United States 11.2%  United Kingdom 10.6%  Denmark 7.7%  China 7.1%  Germany 6.5%  Norway 5.7% (2016)[6]
Imports	DKK 8.4 billion (2019-20) 9%[7]
Import goods	consumer goods 24%, machinery and transport equipment 23.5%, fuels 21.4%, raw materials and semi-manufactures, fish, salt
Main import partners	Denmark 37.4%  Germany 13.3%  Norway 9.3%  China 5.6%  Sweden 4.3%  Iceland 3.8% (2016)[8]
Public finances
Budget balance	$104.1 million (2018)[9]
Revenues	$1.54 billion (2018)[9]
Expenses	$1.43 billion (2018)[9]
Economic aid	Block grant from the Danish state: 641.8 million kr./year (2016–2022)[10][11] (c. US$96 million)

The economy of the Faroe Islands was the 166th largest in the world in 2014, having a nominal gross domestic product (GDP) of $2.613 billion per annum.^[12] GDP increased from DKK 8 billion in 1999, to 21 billion in 2019.^[13] The vast majority of Faroese exports, around 90%, consists of fishery products.^[14]

History

After the severe economic troubles of the early 1990s, brought on by a drop in the vital fish catch and poor management of the economy, the Faroe Islands have recently recovered, with unemployment down to 5% in mid-1998, and holding below 3% since 2006, one of the lowest rates in Europe.

Challenges and opportunities

Salmon farm

Salaries by industry, 2019^[15]

  Service (64%)

  Fishing & farming (20%)

  Construction & manufacturing (16%)

High dependence on fishing (including salmon farming) means the Faroe Islands' economy remains vulnerable. The Faroese hope to broaden their economic base by building new fish-processing plants. The islands allow up to 25% foreign ownership of ocean industry decreasing gradually until 2032 when foreign ownership must end.^[16] Petroleum found close to the Faroese area gives hope for deposits in the immediate area, which may lay the basis for sustained economic prosperity. Also important are the annual subsidy from Denmark, which amounted^[when?] to about 3% of the GDP.^[17]

The Faroes have one of the lowest unemployment rates in Europe (1% in 2019),^[18] but this is not necessarily a sign of a recovering economy, as many young students move to Denmark and other countries once they are finished with high school. This leaves a largely middle-aged and elderly population that may lack the skills and knowledge to take IT positions in business and industry. Since 2000, new information technology and business projects have been fostered in the Faroe Islands to attract new investment. The result from these projects is not yet known but is hoped to bring a better market economy to the Faroe Islands.^{[citation needed]} The population was around 52,000 by 2019.^[19]

General salaries increased from DKK 7 billion in 2013 to DKK 10 billion in 2019.^[15] In 2020, salmon exports were DKK 3.3 billion. Fishing industries occupied 1,441 people on land and 1,341 at sea.^[20]

Trade

In 2014 the Faroe Islands had a trade surplus of 401 million DKK,^[21] a figure that rose to 1.43 billion DKK in 2016.^[22] As of 2016, the Faroe Islands mainly imported goods from Denmark (2,467 million DKK), Germany (877 million DKK), and Norway (610 million DKK).^[8] The country's top export destinations were Russia (1,907 million DKK), the United States (898 million DKK), the United Kingdom (851 million DKK), and Denmark (697 million DKK).^[6] European Union countries constituted 72.9% of total Faroese imports, while the exports of the Faroe Islands were more equally distributed between European Union (44.4%) and non-European Union countries (55.6%).^[22] The vast majority of Faroese exports, around 90%, consists of fishery products.^[14][23] Russian countersanctions on food imports from Norway and the European Union, saw the Faroe Islands increase its fresh salmon exports to Russia.^[24][25][26] The Faroe Islands has a free trade agreement with Iceland since 2005.^[27]

Imports and exports in 2014; values in million Danish krone (DKK)^[22]^[8]^[6]

Rank	Imports		Rank	Exports
	Origin	Value		Destination	Value
1	Denmark	2,467 DKK	1	Russia	1,907 DKK
2	Germany	897 DKK	2	United States	898 DKK
3	Norway	610 DKK	3	United Kingdom	851 DKK
4	China	371 DKK	4	Denmark	697 DKK
5	Sweden	282 DKK	5	China	569 DKK
6	Iceland	248 DKK	6	Germany	521 DKK
7	Italy	186 DKK	7	Norway	460 DKK
8	United Kingdom	169 DKK	8	France	369 DKK
9	France	148 DKK	9	Netherlands	284 DKK
10	Netherlands	143 DKK	10	Poland	251 DKK
–	European Union	4,807 DKK	–	European Union	3,561 DKK
–	Non-EU countries	1,785 DKK	–	Non-EU countries	4,461 DKK
–	Total	6,592 DKK	–	Total	8,022 DKK

Energy

Main article: Energy in the Faroe Islands

Oil consumption peaked at over 300,000 tonnes in 2020, of which 30% was for fishing vessels.^[28] In 2014 217,547 tonnes of oil products were consumed in the Faroe Islands.^[29] Of this 31.58% was consumed by fishing vessels, 14.73% was used by SEV for electricity production, 23.23% was consumed in air, sea or land transport, 9.6% was used in the industry, and the rest was used in public or private buildings.^[29]

The islands have 6 hydroelectric plants,^[30] 4 diesel plants^[31] and several wind power plants with a capacity factor above 40%.^[32] In 2014, a 12MW wind farm for DKK 180 million^[33] became operational near Torshavn and increased wind capacity from 6.6 to 18.6MW. It decreases oil consumption by 8,000 ton (approximately 4M€) per year.^[32] A 2.3MW 700 kWh lithium-ion battery^[34] became operational in 2016.^[35] Planners also consider converting the existing hydropower^[36] to pumped-storage hydroelectricity.^[33] Tidal power^[37] and Thermal energy storage solutions are also considered.^[38] The islands have a goal of 100% green electricity production by 2030.^[33][39]

External images
Current production, pie diagram
Current production, numbers

In 2014 and 2017^[40] 50.8% of the electricity production of SEV in the Faroe Islands came from green energy like hydro and wind, while 49.2% was produced by the thermal power plants, which was 12.4% less than in 2013.^[41]

• fossil fuel: 49.2%
• hydro: 39.5%
• wind: 11.3% (2014)
• nuclear: 0%

Total annual production: 305.4 GWh (2014) of which the production of thermal, hydropower and wind power was:

• Thermal: 150,2 GWh
• Hydropower: 120,7 GWh
• Wind: 34,5 GWh

The Faroe Islands have no electricity connections to other areas, and thus operate in island condition. Some islands are also not connected to the other islands, and must maintain their own electric system.^[42]

Other

Agriculture - products: milk, potatoes, vegetables; sheep; salmon, other fish

Currency: 1 Danish krone (DKr) = 100 ører

Exchange rates: Danish kroner (DKr) per US$1 – 5.560 (2008), 7.336 (January 2000), 6.976 (1999), 6.701 (1998), 6.604 (1997), 5.799 (1996), 5.602 (1995)

Further reading

• www.FaroeseSeafood.com - Information site on fisheries and aquaculture in the Faroe Islands
• Apostle, Richard A. The Restructuration of the Faroese Economy The Significance of the Inner Periphery. Frederiksberg, Denmark: Samfundslitteratur, 2002. ISBN 87-593-0891-5
• Elkjær-Hansen, Niels. The Faroe Islands Scenery, Culture, and Economy. Copenhagen: Royal Danish Ministry of Foreign Affairs, 1959.
• Hagstova.fo, 2008 figures

References

1. "Main figures - Gross domestic product". Statistics Faroe Islands. 26 April 2019. Archived from the original on 12 November 2019. Retrieved 21 May 2020.
2. "Changes in CPI, average annual inflation rate". Statistics Faroe Islands. Retrieved 21 May 2020.
3. "Risk of poverty". Statistics Faroe Islands. Retrieved 21 May 2020.
4. "Labour force". Statistics Faroe Islands. Retrieved 21 May 2020.
5. "Exports exceed DKK 9 billion". Statistics Faroe Islands. 17 April 2020. Retrieved 21 May 2020.
6. "Exports by country of final destination (1988-2016)". Statistics Faroe Islands. Retrieved 5 November 2015.
7. "Total imports at DKK 8.4 billion". Statistics Faroe Islands. 17 April 2020. Retrieved 21 May 2020.
8. "Import by BEC-groups, country of origin and months (1988-2017)". Statistics Faroe Islands. Retrieved 5 November 2017.
9. "General government". Statistics Faroe Islands. 1 November 2019. Archived from the original on 12 November 2019. Retrieved 21 May 2020.
10. "Forslag til finanslov for finansåret 2022" (PDF). Finansministeriet. 30 August 2021. p. 100. Retrieved 22 December 2022.
11. "Finanslov for finansåret 2022" (PDF). Finansministeriet. 7 February 2022. p. 92. Retrieved 22 December 2022.
12. "Gross domestic product 2014" (PDF). World Bank. 18 September 2015. Retrieved 12 October 2015.
13. "GDP more than doubled from 1999 to 2019". Kringvarp Føroya (in Faroese). 23 February 2021.
14. "Economy of the Faroe Islands". Visit Faroe Islands. Retrieved 18 January 2020.
15. Djurhuus, Høgni (11 January 2020). "Salaries exceeded DKK 10 billion last year". Kringvarp Føroya (in Faroese).
16. Hvidtfeldt, Jón Brian (23 December 2019). "Foreign ownership in fishery industry continues". Kringvarp Føroya (in Faroese).
17. "Information about the economy of the Faroe Islands". 21 December 2022.
18. Djurhuus, Høgni (13 January 2020). "Enough funds to cover 12 years of unemployment". Kringvarp Føroya (in Faroese).
19. "Population now close to 52,000". Kringvarp Føroya (in Faroese).
20. "Number of fishing industry jobs halved since 1985". Kringvarp Føroya. 23 April 2021.
21. "Faroe Islands in Figures 2015" (PDF). Statistics Faroe Islands. Archived from the original (PDF) on 4 March 2016. Retrieved 5 December 2015.
22. "Faroe Islands in Figures 2017" (PDF). Statistics Faroe Islands. Archived from the original (PDF) on 5 February 2018. Retrieved 5 November 2017.
23. "Trade and Industry". VisitFaroeIslands.com. Archived from the original on 8 December 2015. Retrieved 5 December 2015.
24. Pettersen, Trude (September 3, 2015). "Faroe Islands cashing in on Russian sanctions". Barents Observer. Retrieved 5 December 2015.
25. Rutkowski, Lena (18 October 2015). "The Faroe Islands don't play by EU rules". The Murmur. Archived from the original on 8 December 2015. Retrieved 5 December 2015.
26. "Faroe/Russian fishery agreement renewed". Kringvarp Føroya (in Faroese). 10 December 2019.
27. Johannessen, John (29 December 2019). "Faroe/Iceland free trade deal renewed". Kringvarp Føroya (in Faroese).
28. "Oil consumption peaked last year". Kringvarp Føroya. 22 March 2021.
29. "Consumption of oil in tonnes by consumer groups". Statistics Faroe Islands. Retrieved 6 December 2015.
30. "Hydro electric power".
31. "Thermal Power".
32. Terji Nielsen. Wind energy in the Faroe Islands Archived 2015-12-08 at the Wayback Machine page 19-21. SEV, 2015
33. "Green Progress".
34. "Faroe Islands to get Europe's first wind-connected battery storage system". Renew Economy. 15 April 2015.
35. "Lithium-ion batteries can help to safeguard the grid". 8 November 2016. Retrieved 1 March 2017.
36. Bárður A. Niclasen. Vedvarende energi Archived 2015-12-08 at the Wayback Machine 2015
37. "Tidal Energy on the Horizon".
38. Jannicke Nilsen (27 November 2015). "ENERGYNEST - THERMAL ENERGY STORAGE - TES". Teknisk Ukeblad. Archived from the original on 4 January 2023. Retrieved 30 November 2015.
39. "100by2030". SEV. Retrieved 1 March 2017.
40. "Forsíða".
41. "SEV - Framleiðsluroknskapur 2014 Production Accounts 2014" (PDF) (in Faroese and English). SEV. Archived from the original (PDF) on 28 May 2016. Retrieved 25 September 2015.
42. "SEV recommends wind turbines for Suðuroy".

External links

• Faroese banknote series Information about Faroese banknotes