The Faroe Islands have a small open economy, which is largely dependent on areas of expertise that are related to the ocean and associated fields of knowledge. The work being done within the fields of fisheries, shipping, aquaculture, marine biology, navigation, oceanography and biotech is continuously ground-breaking and serves to sustain the Faroese economy.
The fishing industry, which is distinctly diversified and constantly developing, has been the main source of income for the Faroe Islands since 1920. It has played to play a major part in the economy and continues to do so today. Fishing and related fishing industries employ around 15% of the labour force and accounted for approximately 20 percent of the gross value added to the Faroese economy. The fishing industry (including farmed fish) also represents around 90% of the total export of goods and services. For the last decades, the Faroese economy has worked towards developing a more diversified and competitive business community.
Like most countries, the global financial crisis of 2008 also affected the Faroese economy. Unemployment rose from 1.5% in 2007 to 7.4% in 2010. Promisingly, the Faroese economy has since stabilized. In late 2017, unemployment was registered at 2.1%. This is largely based on growth in salmon farming and pelagic fisheries. Additionally, investments in large construction projects have meant an increase in labour demand.
Fluctuation in growth
A common feature of the Faroese economy is the vacillation in growth rates from year to year. This is because of the economy’s limited size and great reliance on the export of fish products.
Although the fishing industry continues to lead the way, the Faroese business sector is becoming increasing varied and competitive. During the last decades, greater emphasis has been placed on building and developing new industries, partially to ease the dependency on fishery. These industries include financial services, petroleum related businesses, shipping, manufacturing, IT and telecoms, tourism, civil aviation and creative industries.
The Faroe Islands has entered into a number of Trade Free Agreements and agreements on fishing rights with neighbouring countries, such as Norway, Iceland and Switzerland. Another trade partner is the European Union, as the Faroe Islands is not a member of the EU.
The financial sector is made up of 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 used in the Faroe Islands, the Faroese króna, is issued by the Danish National Bank. It holds the same value as the Danish Krone.