How the Faroese economy moved from the open sea into the fjords

How salmon farming took over the Faroese fjords

Fish farming in the Faroe Islands started in the 1960s with the government's encouragement, and in 1970 the government founded the research institute now called Firum. The first farms raised rainbow trout, which turned out not to pay. Salmon farming grew from the early 1970s and was a major industry by the 1980s. Trials with halibut and cod failed, and a small seaweed industry now works beside the salmon.

What the disease did to the farms

More than 60 salmon farming operations were at work by the 1990s, under rules written for another purpose. The industry answered to general animal health laws designed mainly for imports, there was no detailed biosecurity legislation, and seabed surveys were introduced in 1998. A series of outbreaks of ISA, a salmon disease, began in 2000. The Food and Veterinary Authority's production series shows 43,000 tonnes of gutted salmon in 2003 and 10,500 tonnes in 2006. Bankruptcies and withdrawn licences had already cut the number of companies to 26 by 2002.

Three remain. A Falkland Islands Government report written after a visit in May 2025 names them and their shares: Bakkafrost, a publicly listed company, with around 70% of Faroese salmon; Hiddenfjord, locally owned by a family, with around 20%; and the Norwegian company MOWI with around 10%.

What the rules after the outbreak changed

The legislation written after 2000 turned salmon into a crop that can be scheduled. The geography article describes how each fjord zone is stocked and emptied as one unit. The economic side of that rule is the approval cycle. A production cycle runs one to two years and has to be approved separately by the Food and Veterinary Authority and the Environment Agency, which judge it largely on the previous cycle's mortality, sea lice counts and seabed surveys, and operators usually get provisional approval about a year ahead. Farming licences run for 12 years and are in effect renewed for any company that meets its conditions. None has been revoked since the 2000s. The Faroe Islands also signed a veterinary agreement with the European Union early in 2001, which required the industry to show that its salmon was produced in a healthy way.

The volumes came back under that regime and then passed their old level. Output reached 63,000 tonnes in 2012, a record of about 95,000 tonnes in 2021 and 88,000 tonnes in 2024. The fish now spend about 15 months at sea, down from around two years, because they are kept longer in onshore smolt stations before release. Bakkafrost planned more than DKK 2 billion of investment in onshore facilities between 2016 and 2020, which the company said would raise output capacity by around 30% over several years from 2020 and leave the fish less exposed to disease.

Why the Faroese economy moves with fish prices

Danmarks Nationalbank, which analyses the Faroese economy because it is the central bank for the whole Danish realm, put fisheries and aquaculture at one sixth of Faroese gross value added in September 2017 and at more than 95% of goods exports once ships and aircraft are left out. The Faroese government's own figures count the fishing industry with its related trades and give fish and fish products 90 to 95% of export value, around 20% of GDP and around 15% of the labour force. Salmon alone accounted for 46% of exports in 2024.

The two halves of that trade behave differently. Catches depend on stocks, which change from year to year and do not change in step for every species. Farmed output is steadier, although it carries biological risk, and the Nationalbank described aquaculture as the part of the economy where production planning is easier. Prices move both.

Mackerel shows how far a stock can carry the economy. Larger stocks in Faroese waters made the average catch of 2011 to 2016 more than three times that of the six years before, and with higher prices the export value was almost five times higher. In 2016 the mackerel quota was around 15% below the 2015 quota, and export value still rose 16.5% on higher prices and slightly larger volumes. Herring went the other way that year, with catches down by more than 20%.

Salmon prices did the same work on the farmed side. Faroese export prices for salmon rose by about 100% between the first half of 2012 and mid-2017. Part of the rise came from a 7% fall in the world supply of salmon in 2016, when algal bloom hit farms in Chile and Norwegian farms had biological problems of their own. The value of Faroese salmon exports went from about DKK 380 million in 2006 to about DKK 3.6 billion in 2016, a rise by a factor of almost ten, and reached DKK 3.3 billion in 2020.

What the islands sell and to whom

Exports excluding ships and aircraft rose by around 75% between the first half of 2012 and mid-2017 while imports grew by just over 30%, and in the twelve months to June 2017 the surplus on goods came to 7.3% of GDP, or DKK 1,370 million. During the previous boom, which peaked around 2007, the islands had run a deficit of about the same size. Wikipedia's figures for 2016 show where the goods went and where the imports came from.

Countries of the European Union supplied 72.9% of Faroese imports in 2016, while exports split 44.4% to the Union and 55.6% outside it. The Russian figure followed the sanctions of 2014, which the politics article covers. Russian countersanctions on food imports from Norway and the European Union left the Faroes outside the ban, and Faroese exports of fresh salmon to Russia rose.

How the Faroese boom has slowed

The World Bank recorded Faroese output of 4.05 billion United States dollars in 2024, or 74,175 dollars a head and 82,089 dollars at purchasing power parity, with growth of 0.8%. In January 2026 the Nationalbank described an economy that had slowed after several years of strong growth driven by fishing and aquaculture. Falling salmon prices had dampened exports, lower fishing quotas were in prospect, and uncertainty over trade policy added to the risk for what it called a small, open and relatively undiversified economy. Hagstova Føroya, the statistics office, compiles the national accounts in current prices only, which makes real growth harder to assess, and the figures arrive some time after each year closes.

Why the Faroese fishing economy collapsed and recovered

Fishing has carried the islands for a little over a century. Britannica dates the change from an economy built on sheep to one built on fishing and fish processing to the years after 1900, with frozen and dried cod as the main exports. Wool survives as a small spinning and knitting trade done at home, and grass for sheep is still the main crop on land that is barely cultivated.

The crash of the early 1990s came from both sides of the ledger. Britannica attributes it to poor fiscal discipline in the 1980s combined with a collapse of the fishing industry through overfishing, and records that it needed Danish intervention. Faroese banking contracted by 25% in 1992 and about 15% of the population left for Denmark. Unemployment reached 10 to 15% by the mid-1990s. The Nationalbank's employment series shows private sector wage earners falling from about 18,200 in 1989 to about 11,800 in 1994.

Recovery came in 1997 and 1998, and many of those who had left came back. Unemployment was about 6% at the end of 1998, 1.1% in June 2008 and 3.4% in early 2009, after the financial crisis. It fell to 0.9% in December 2019. In 2008, in the wake of the financial crisis, the Faroe Islands lent 52 million dollars to Iceland.

The stocks around the islands took longer. The demersal species, cod, haddock and saithe, stay in Faroese waters and are regulated from Tórshavn, and the Nationalbank recorded in 2017 that they had been historically low, partly because catches had exceeded the advice of marine biologists for decades. Cod still made up 9% of the value of fish exports in 2016, much of it caught in the Russian zone of the Barents Sea. The Faroe Marine Research Institute reported more young saithe and haddock coming into the stocks in 2017, which it expected to allow more fishing along the coast within a few years.

Who is allowed to own Faroese fish

Two questions about the fish run through Faroese economic policy: who may hold the right to catch or farm it, and how much of the return reaches the public purse.

How fishing rights are allocated

The Nationalbank estimated that the fisheries sector earned above-normal profits of around DKK 1 billion a year in 2015. It called this economic rent, the return on free or cheap access to a shared resource, and wrote that it had gone to an excessive degree into profits and wages for a limited group. On 22 May 2017 the Faroese government put a fisheries reform bill to the Løgting built on three principles: market-based allocation of quotas, management of stocks on biological advice, and ownership of every fishing right by Faroese residents. Part of the quota would be sold at auction as short or long licences, and a resource tax set at the auction price would fall on the rest. Demersal fishing, managed until then by allocating days at sea within an area, would move to quotas based on biological advice.

Ownership was the sharper change. The law in force in 2017 allowed foreign owners up to 67% of the equity in a fishing company. The bill proposed that shipping companies be wholly Faroese-owned and based in the islands for at least five years, with no limit on foreign financing of vessels and a transition period. The Løgting did not agree the bill before the summer break, and it was tabled again with changes on 14 September 2017. Wikipedia's account of the rules as they stand gives foreign ownership of the ocean industry a ceiling of 25%, falling gradually until it ends in 2032.

How salmon is charged and owned

Salmon farming companies must be 50% locally owned, a rule that cannot be applied backwards to existing holdings, and the managing director must be Faroese and the headquarters in the islands. In 2023 the industry paid around DKK 655 million in taxes, resource rents and other charges. The resource rent is calculated on the tonnage sold and a set market price for salmon, and the rent per site is around DKK 50,000 a year. The government runs a licensee-pays principle for the cost of regulation, and the industry has had no tax breaks in recent years. Municipalities have tried to keep ownership of the land under onshore sites as a long-term source of revenue.

A respondent from Visit Tórshavn, interviewed for a study in Island Studies Journal, described the fishing side from outside: "it is very difficult for others to get in, it is almost impossible."

How Faroese workers follow the fishing cycle

Faroese unemployment figures read low, and the Nationalbank warned in 2017 that they cannot be compared directly with those of other economies. The population moves. The labour force shrank through net emigration in the lean years, which ran at about 450 people a year in 2006 and again in 2011, and in the twelve months to mid-2017 net immigration was about 450, much of it Faroese people coming home. Unemployment stood at 2.5% of the labour force in July 2017.

Employment rose by around 2,300 people, almost 10%, between the second quarter of 2013 and the same quarter of 2017. Construction and aquaculture together accounted for every other job created in the year to mid-2017. Aquaculture employed less than 4% of wage earners in 2013 to 2015 and produced more than 6% of gross value added, because farming salmon needs relatively little labour. By 2025 around 4.5% of the workforce was employed directly by salmon farming and an estimated 7 to 8% in related work, helped by the fact that all the salmon feed is made in the islands.

A further group lives in the Faroes and works abroad. Skilled workers and builders in particular take jobs outside the islands for higher wages and tax benefits, and net income from employment abroad was calculated at DKK 800 million in 2012. The opposite flow shows in the salmon industry, which by 2025 had recruited a large number of staff from overseas because almost everyone at home was already employed, adding to pressure on housing.

House prices in Tórshavn rose 17% in 2016, and the average Tórshavn house sold that year for about DKK 2.51 million against about DKK 0.90 million in the small settlements. Faroese homeowners pay no land or property tax, and in 2016 the state refunded 35% of mortgage interest up to a ceiling of DKK 110,000. In January 2026 the Nationalbank described a labour market with virtually no unemployment in which the inflow of foreign labour had slowed.

What Denmark pays towards the Faroese budget

The Home Rule Act of 1948 came with a financial subsidy from Denmark to cover the cost of Danish services in the islands. In the independence talks that began in 1999, the yearly payment was put at one billion kroner. The grant was cut by around a third in 2002, and the Nationalbank's series of public balances shows the Faroese surplus falling that year for that reason. Danish aid made up 13% of Faroese national income in 2011, roughly 5% of GDP, and the block grant came to DKK 642 million in 2017.

On the Nationalbank's comparison, Faroese GDP of DKK 16.7 billion in 2015 came to DKK 342,700 a head against DKK 358,000 in Denmark. Faroese gross national income that year came to DKK 370,100 a head. Wikipedia gives GDP in current prices as DKK 8 billion in 1999 and DKK 21 billion in 2019.

Who issues the Faroese money

The money is Danish. The Faroese króna is issued by Danmarks Nationalbank at the same value as the Danish krone, and Faroese or Danish banknotes circulate with Danish coins. Four banks, two insurance companies and two life insurers make up the financial sector, all supervised by the Danish Financial Supervisory Authority. In March 2017 the Danish Systemic Risk Council found the Faroese banks exposed to the concentration of the economy and recommended a systemic capital buffer, which was set at 1% from 1 January 2018.

Why Faroese budgets have followed the boom

The Economic Council for the Faroe Islands found in 2015 that public consumption and investment had risen whenever revenue rose with the cycle, and fallen with it in downturns. The Nationalbank saw the pattern repeat in 2016, when public consumption rose 9.1% and local government investment rose 41%, with municipal budgets planning a further 20% for 2017. The Council calculated in 2015 that a permanent tightening of 5% of GDP was needed to stabilise net public debt, and suggested raising the retirement age gradually from 67 to 72 towards 2048. In January 2026 the Nationalbank was again recommending a fiscal planning framework for the whole public sector, because fiscal policy was adding to activity in an economy already under pressure.

Where oil and tourism fit in the Faroese economy

The islands burn imported oil to fish. Of the 217,547 tonnes of oil products consumed in 2014, fishing vessels took 31.58%, and consumption peaked above 300,000 tonnes in 2020 with 30% going to the fleet. Britannica lists fuels among the main imports, beside basic manufactures and transport equipment.

Oil under Faroese waters was the other hope. Britannica described the islands entering the 21st century on the promise of offshore drilling, and in 2012 Equinor began an exploration programme estimated at 166.46 million dollars. After four wells it gave up in 2015, and no drilling has taken place since.

Tourism is the business that grew instead. It accounted for 1.4% of GDP in 2015. Visit Faroe Islands saw its marketing funds double in 2013, a new terminal opened at Vágar Airport in 2014 with more than 250,000 passengers expected that year, and the first international hotel chain opened in late 2020. Overnight stays grew by more than 60% in ten years to 2022, according to Hagstova Føroya, and a University of Copenhagen article of October 2025 put tourism revenue above one billion kroner a year. Growth has met resistance where it concentrates: in 2023 residents of Saksun, a settlement with 13 inhabitants in 2025, put up signs in English after visitors trampled the grass their sheep graze.

The newest road tunnel was planned around industry. The Eysturoy tunnel, opened in 2020, runs through Runavík, where the islands' main fish factories stand, and cut the drive from Tórshavn to Runavík from 1 hour 14 minutes to 16 minutes. A respondent quoted in the same Island Studies Journal paper said fish companies could cut their travel times by half. The Faroese government also lists financial services, shipping, manufacturing for the maritime industries, aviation, IT and the creative industries among the other trades, and the brewery Föroya Bjór has made beer since 1888.