Faroe Islands are ranked among the highest in the world based on GDP per capita. This prosperity is partially due to the pristine marine environment with abundant fisheries resources and to a significant entrepreneurship, which dates centuries back.
Given the relative small domestic market, the Faroese economy depends to a large degree on exports and the foundation of the Faroese economy are the exports. The economy is relatively open and the Government of the Faroe Islands has entered into free trade agreements with several other countries.
Fisheries and Aquaculture
Fisheries, and related industries, are the largest components of the Faroese economy. Fish and fish products account for between 90 and 95 percent of the total export value, and around 20 percent of the GDP and 15 percent of the labor force are employed by the fishing industry.
Faroese vessels fish pelagic and demersal fish in both Faroese and foreign waters, such as Cod, Mackerel, Herring, Saithe, Haddock. The annual amounts vary from year to year and or the last years, the total amount of fish caught per year exceeds 600.000 tons, making the Faroe Islands a major actor in international fisheries.
The waters of the Faroe Islands are favorable for aquaculture, especially Atlantic salmon. Further, given the comprehensive regulations and know-how, the aquaculture industry of the Faroe Islands is considered as a world leader in the field. Today, salmon exports represent almost half of the total exports of the Faroe Islands. In 2019, production of salmon aquaculture was approximately 80.000 tons.
There are also several other important and promising industries in the Faroe Islands, some well-established and others still taking shape. These include financial services, petroleum related businesses, shipping, manufacturing (esp. servicing the maritime industries), civil aviation, IT and telecoms, creative industries and tourism.
The Faroese Financial Sector
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. 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.
Free Trade Agreements
Among the numerous free trade agreements that the Government of the Faroes has concluded, the most comprehensive agreement is the treaty commonly known as the Hoyvík Agreement, which is an enhanced trade treaty with Iceland that entered into force in 2006. This agreement establishes a single economic area encompassing the territories of both countries, with free movement of goods, services, capital and persons.
World Trade Organization
It is spelled out in the Governmental coalition agreement from September 2019 that the Government of the Faroe Islands shall strive to become a separate member of the World Trade Organization.