Faroese economy rescued by strong companies

Faroese corporations and households were braced for the economic blow caused by the Covid-19 pandemic.

So concludes an analysis of the Faroese economy, conducted by the Danish national bank.

The pandemic has taken a toll on economic activity in the Faroes, but an effective Faroese containment strategy has reduced the need for introducing long-term and austere measures to prevent the spread of the virus.

 SEE ALSO Council: economy will improve next year

Fish prices have been negatively affected by the pandemic, but the aquaculture and fishery industries have adapted well to the situation by converting much of its sales from restaurant customers to retail trade customers.

The economy has also been kept afloat because corporate investment appetite has remained intact as a result of Faroese companies being well consolidated prior to the pandemic.

Another important reason for the Faroese economy withstanding the shock is the labour market compensation schemes.

The construction industry, for instance, has seen a wage growth of 4 percent along with a shortage of workers.

 SEE ALSO Record-high spending not solely due to pandemic

Although these compensation schemes were phased out in September, unemployment is at the same levels as before the pandemic, and despite the big fluctuations this year, the Faroese economy is still booming, according to the analysis.

International organisations say the global economy has now entered a recession, with a long and uncertain recovery ahead.

This has an impact on a small economy like the Faroese as the weakened purchasing power in export markets across the world will push fish prices down.

Faroese export firms can therefore expect lower earnings in the coming years, and according to the analysis, the economic boom in the Faroes is now likely to have peaked.