Tourism Boom Key to Iceland’s Success In Lifting Capital Controls

The island nation's underdog economy is about to emerge triumphant

Tourist Economy At The Blue Lagoon Thermal Spa

Visitors pass along walkways spanning the Blue Lagoon geothermal spa as steam rises in Grindavik, Iceland, on Friday, Nov. 8, 2013.

Photographer: Arnaldur Halldorsson/Bloomberg

Iceland is counting on its unique landscape of hot springs and geysers to keep the economy stable as it undergoes a historic transformation.

The nation is preparing for what many are calling a gold rush in its tourist trade as the number of visitors are set to jump 23 percent this year and to as many as 3 million a year by 2020, according to Islandsbanki hf. For a population of just 320,000 people, that's a lot of guests.

That forecast has the government racing to build the necessary infrastructure.

``I'm very impatient and we've been putting more funds into the sector,'' said Ragnheidur Elin Arnadottir, Iceland's tourism minister. ``We can't afford to not be efficient.''

It's clear that tourism is helping Iceland's economy. The share of tourism to GDP rose 55 percent from 2009 through 2013, according to the latest data from Iceland's statistics office.

Capturing that growth could help seal Iceland's status as a model for how to protect state coffers and consumers while successfully emerging from a banking meltdown. Policy makers are now hoping the nation's economic health, and a steady inflow of tourism cash, will help them withstand the removal of capital controls that are holding hostage $6 billion.

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