With 48.000 inhabitants spread over 18 islands in the North Atlantic the Faroe Islands are the world’s smallest independent economic entity. Six of the islands with 86% of the population are now connected by bridges and underwater tunnels. Besides many villages have been linked by means of mountain tunnels, and the road- net has thus turned the country into an interconnected unit.
The Faroe national income per capita is amongst the world’s highest, though 10-15% lower than those of the major countries in Northern Europe.
The Composition of the National Economy
Faroe industry is marked by the fact that a steady renewal of the raw material processing equipment has influenced the economy greatly. The primary sector still employs 11% of the workforce, which is high compared to Iceland and higher still than other North European countries.
Fish makes up 95% of the export value of goods, first and foremost processed fish products, brought ashore by Faroe fishing vessels, secondly farmed fish and thirdly imported fish or fish landed by foreign vessels.
The economic importance of the fisheries is also evident in the fact that 9% of the 23% of the businesses in the secondary sector process fish, again ralatively much more than in our neighbouring countries.
The fish industry has repeatedly been resturctured in the past half century. The changes have included changing fishing rights around Iceland, Greenland, Canada, Denmark, in the Barent Sea and international waters. Fishing around Faroe has also changed and grown in importance for the industry, among other reasons because fishing rights in foreign waters have been traded with other nations’ rights in Faroe waters.
Fish species, products and markets have changed in step with fishing grounds and market demands. The political framework around the fish industry has been altered much in the past 50 years. In the 1950s the authorities prompted the fishermen into employing new methods with loans, guarantees and subsidies, until in the 1980s these incentives had outlived their usefulness and brought the entire industry and the national economy to rack and ruin in 1991—’93. Since then the authorities have increasingly withdrawn from detailed guidance, so that subsidizing, guarantees and public loans are almost gone.
Aquaculture is a relatively recent industry in Faroe with just a 40 year history behind it. In the past 20 years this industry has had two major slumps with heavy losses to investors and lenders. Fish farming has up until 2003 accounted for up to 25% of the export value of goods, while in the first half of 2006 it only accounted for 8% of our exports. This decline was caused by partly low market price and the fish disease ILA (Infectious Salmon Anemia). The industry has now been restructured into fewer and bigger units.
The fisheries sector employed 19% ….. (?) of all 16—64 year olds in 2005, which is much more than in our neigbouring countries. Many women only work half time (46%). The unemployment rate is only 3—4%.
The Faroe Islands came into being out of volcanic eruptions about 60 mill. years ago. After that there was a quiet period long enough for wooded vegetation to take root. Then the Faroes were located much further south than today, climatically like the present subtropical southern end of Japan. That is evident from the plant fossils of the Faroe coal seam, such as the Temple Tree and the now extinct “Metasequoia occidentalis”.
The latest Ice Age ended in Faroe about 12.000 years ago, and slowly the vegetation returned. The climate was arctic to begin with, so the plants were similar to what one finds in Greenland today. At that point there was Dwarf Birch on the islands. As it grew warmer, the vegetation also changed so that Dwarf Birch disappeared while Common Juniper took over. Shortly before the Viking settlement the weather grew more humid, and the Vikings found islands with shrub wood and larger herbaceous plants. It is evident that Juniper, Willow and Birch were common prior to the settlement, but also Oak Trees have grown here.
After the islands were settled the grasses, which earlier had accounted for 20-30% of the pollen, produced the bulk of it (50-60%). At the same time pollen came from plants such as Rumex, wild grasses (unlike grains such as Barley and Oats), Marsh Marigold, plants of the Pink family, Crucifer, Labiates, Nettle and Angelica.
Today the vegetation of the Faroes is less varied in species and most closely akin to that of Iceland or the northern British Isles. The natural wood or shrub vegetation is all but gone, and one meets almost exclusively low Willow and creeping forms of Common Juniper.
A few imported trees and shrubs have been planted on some of the biggest islands, and in particular Conifers do well. The present situation is that grassy moor is the dominant vegetation often with a smattering of Heather and Common Billberry. At the loftiest places one may find the odd mountain plant. On the other hand one may see the most vigorous growth in rock crevices and on low-lying rock ledges. Fenced enclosures which protect the vegetation from grazing sheep also have a rich flora. The Faroes have about 400 species of Vascular Plants and 400 sorts of Mosses and Lichens.
Faroe women bear more children than women in other European countries with the consequence that the Faroe population has increased by 0.6% p.a. since 1970, even if yearly emigration has been 0.3% on average. Young Faroese go to Denmark and other countries to study.
The migration between the Faroes and foreign lands has partly been caused by the economic
cycles. The Faroese are very mobile, and they seem to adapt easily and settle easily in neighbouring countries.
Economic Growth and Future Outlook
The Faroe national income per capita is about 15% lower than that of the major European countries. NI, compared to that of Scandinavia, also comprises the Danish state subsidy (app. 7% of the NI). The GNP p.c. is lower than that of the Nordic countries.
The Faroes have the past 40 years had a yearly growth in national income per capita of 2.4% measured in purchasing power. This compares with Iceland, is higher than Denmark and lower than Norway. It should also be noted that the cyclical swings in the Faroe economy are more volatile than in other coun
tries, measured in standard deviance of the growth (table below):
Growth in National Income per Capita 1966—2006
|% Growth a/a||Standard Deviance|
Source: OECD and Landsbanki Føroya
The Faroe economy has as the growth figures show managed fairly well compared to our neigbours, even though we suffered a severe setback 13 years ago.
The collapse led to the demise of many old companies and the formation of new ones or the reconstruction of old undertakings on a new and stronger financial basis. The development over the past 12 years has strengthened many companies, which now work on firm ground.
The past two years well run operations have been traded for DKK 1.5 bill, total. This is much money and something new in Faroe. Both public and private companies are being readied for the just founded Faroe and existing Icelandic Stock Exchange.
The swings in the economy and changes in the age composition of the population are challenges to Faroe politicians. Better financing options for our industries and signs of better dynamics indicate a brighter outlook for the Faroe economy in future.