Britain up slightly to 35th position, US up six places to 83rd while Iraq sits at the bottom of the list

On top of the many humiliations that have rained down on Iceland recently – the implosion of its economy, banks and currency to name just three – the erstwhile Viking tiger today lost its title as the safest place in the world.

New Zealand is now officially your best bet for a risk-free destination, according to the new Global Peace Index (GPI), an annual ranking of the world's nations on the basis of how peaceful they are.

Despite the much-vaunted progress on security, Iraq remained bottom of the list, below Afghanistan, Somalia and Israel, which found itself listed as more dangerous than Sudan and the Democratic Republic of the Congo. At the top, the usual Nordic suspects clustered below New Zealand: Denmark, Norway and Iceland came second, third and fourth, followed by Austria and then Sweden.

Britain was 35th: better than last year, and one position higher than Italy, but still below most of Europe and countries as diverse as Botswana, South Korea, Malaysia and Qatar.

The United States has clawed its way up six places to 83rd – still weighed down by two foreign wars, a high prison population and the general availability of guns. Its slight rise was attributed to the number of years since 9/11 that the country has avoided a terrorist attack, and the relative decline of other countries.

The index was collated by the Economist Intelligence Unit for a new thinktank called the Institute for Economics and Peace. It uses a weighted mix of 23 criteria, including foreign wars, internal conflicts, respect for human rights, the number of murders, the number of people in jail, the arms trade, and degrees of democracy.

This year's results found the economic downturn had made the world a little less peaceful. That, say the authors, "appears to reflect the intensification of violent conflict in some countries and the effects of both the rapidly rising food and fuel prices early in 2008 and the dramatic global economic downturn in the final quarter of the year.

"Rapidly rising unemployment, pay freezes and falls in the value of house prices, savings and pensions is causing popular resentment in many countries, with political repercussions that have been registered by the GPI through various indicators measuring safety and security in society."

The results come from a groundbreaking study, released alongside the 2009 GPI, which estimates the economic impact of lost peace on the global economy at $7.2tn (£4.4tn) a year.

Of this, $4.8tn is made up of business activities that never see the light of day because of violence; a further $2.4tn relates to the redeployment of resources and expenditure away from industries benefiting from violence to those that benefit from peace.

"The reality is that the net economic benefit of peace to humanity is substantial, and governments and businesses should seriously consider how adopting practices and policies that promote peace helps their bottom line," said Clyde ­McConaghy, who oversees the index at the institute. "It is this kind of thinking that the Institute for Economics and Peace will promote."