New OECD economic report – reducing barriers to competition could have a significant impact on the Icelandic economy.

The Organisation for Economic Co-operation and Development (OECD) recently published a report on the Icelandic economy. Such reports are published every two years. The report's focus on competition is in line with the findings published in the OECD's independent competition assessment of the regulatory framework for the construction and tourism sectors in Iceland, which was released last year. The competition assessment was prepared in close cooperation with the Competition Authority and other government bodies and involved a detailed analysis of all existing regulations in these areas.

This work consisted mainly of analysing the existing regulatory framework to determine whether the rules under which businesses are required to operate contain barriers to competition or unnecessary regulatory burdens that could be removed. The competition assessment made 438 recommendations for improvements to strengthen these sectors and reduce barriers to competition. The OECD estimates that the impact of the recommendations could lead to an increase in GDP of 200 million euros per year, or the equivalent of around 11% of Iceland's GDP. The news about the competition assessment can be read here.

In the economic report published last month, the Icelandic government is urged to implement the changes proposed in the competitiveness report.

It also states that the regulatory framework in this country hinders competition. Consequently, barriers to market entry in Iceland are high compared to other OECD countries. These include, in particular, barriers relating to the internet and service sectors, foreign direct investment, requirements for limited companies and sole traders, and public sector licensing. Furthermore, the regulatory framework for regulated professions is significantly higher in Iceland compared to other European countries and other OECD countries.

It is then warned that the close ties between the political sphere and lobbying groups could increase the risk of a healthy competitive environment being disrupted.

The OECD report on the Icelandic economy in 2021 can be accessed here.