The Impacts of the COVID-19 Pandemicon National Economic Welfare: The GenuineProgress Indicator for Iceland

Abstract

This study assesses the economic impacts of the COVID-19 pandemic in Iceland using the Genuine Progress Indicator (GPI), an alternative macroeconomic measure that incorporates environmental and social externalities omitted from GDP. It updates Iceland’s GPI from 2000–2023, with primary focus on the pandemic period (2019–2023), based on a methodology comprising 28 sub-indicators. Key findings reveal contrasting trends. While GDP fell by 6.0% in the pandemic’s first year, the GPI showed sustained welfare levels. Government investments in education, healthcare, and infrastructure more than offset rising social costs (mainly from unemployment) and declining environmental costs (notably reduced non-renewable resource use and greenhouse gas emissions). Following the full lifting of travel restrictions in 2022 and the tourism boom, both indicators rebounded strongly in 2022 and 2023. The GPI grew by 12.7% and 6.8%, while GDP increased by 18.7% and 11.0%. The results provide indications of Iceland’s economic resilience during crisis and recovery.