Political and economic situation

1.Political, social and economic background and trends

1.4Political and economic situation

Last update: 19 March 2025

Current political situation

Althingi, the Icelandic parliament, is comprised of 63 members elected for a period of four years. Parliamentary elections in Iceland were last held in November 2024. Six parties won seats in Alþingi but two parties that had previously held seats, the Left-Green Movement (Vinstrihreyfingin – grænt framboð) and the Pirate Party (Píratar), failed to obtain representation. The Social Democratic Alliance (Samfylkingin) won the most seats (15) and formed a coalitional government with the People’s Party (Flokkur fólksins) and the Liberal Reform Party (Viðreisn), who won 10 and 11 seats, respectively. Kristrún Frostadóttir, the leader of the Social Democratic Alliance, is the current Prime Minister. The parties in Althingi are displayed in the table below.

Political parties represented in Alþingi, 2025

Political party	Seats in Alþingi (as of Feb 2025)
The Social Democratic Alliance (Samfylkingin)	15
The Independence Party (Sjálfstæðisflokkurinn)	14
The Liberal Reform Party (Viðreisn)	11
The People’s Party (Flokkur fólksins)	10
The Centre Party (Miðflokkurinn)	8
The Progressive Party (Framsóknarflokkurinn)	5

Source: Alþingi

Current economic situation

The Icelandic GDP per capita was €76,350 in 2023 (at market prices), more than twice the European Union average of €38,130 (source: Eurostat). GDP per capita and GDP growth have traditionally been high in Iceland compared to other European countries. By the same token, unemployment rates have traditionally been low (even as low as under 2%). In 2023, the unemployment rate for ages 16-64 was 3,5% (source: Statistics Iceland).

The annual growth of GDP per capita in Iceland was 2,4% in 2023. The economy was negatively affected by the COVID-19 outbreak in 2019 and 2020 but has recovered well in the years since, as seen in the table below.

GDP per capita growth, 2015-2023

Year	GDP per capita, volume change on previous year
2023	2,4%
2022	6,5%
2021	3,7%
2020	-8,1%
2019	0,1%
2018	2,3%
2017	1,7%
2016	4,8%
2015	3,4%

Source: Statistics Iceland

While GDP per capita is comparatively high, it is important to keep in mind that the Icelandic economy is small in size. The main export sectors are tourism, seafood, and aluminum. The tourism sector has grown rapidly in recent years – the number of international visitors grew from 566 thousand in 2011 to nearly 2,3 million in 2024 (source: Icelandic Tourist Board).

Public expenditure on education

In 2023, public expenditure on education amounted to 6,2% of the total gross domestic product. Thereof, 0,8% was spent on pre-primary education, 2,1% on primary education, and 1,9% on secondary education. These figures are relatively stable between years (see table below).

Public expenditure on education, 2000-2023

Year	2000	2005	2015	2016	2017	2018	2019	2020	2021	2022	2023
Public expenditure on education as % of GDP	6,3%	7,1%	6,2%	6,1%	6,4%	6,4%	6,5%	7,6%	7,1%	6,4%	6,2%

Source: Statistics Iceland

Educational attainment

In 2023, 44,5% of the adult population (ages 25-64) had obtained a tertiary education (ISCED levels 5, 6, 7, and 8). 35,1% had completed upper secondary education (ISCED 3 and 4) and 20,4% had a basic education (ISCED 1 and 2). The educational attainment of the Icelandic population has risen considerably over the past decades, as seen in the table below.

Educational attainment of the Icelandic population, 2005-2023

	Year	2005	2010	2015	2020	2023
% of the population ages 25-64 with:	Basic education – ISCED 1, 2	33%	30,8%	26,6%	24,1%	20,4%
	Upper secondary education – ISCED 3, 4	37,9%	37,8%	36,4%	35,3%	35,1%
	Tertiary education – ISCED 5, 6, 7, 8	28,6%	31,3%	37%	40,7%	44,5%