Iceland Economic Forecast

Iceland Economic Outlook

September 28, 2021

The economy rebounded sharply in Q2, growing 7.3%—the fastest rate in nearly four years—and contrasting the 0.2% contraction clocked in Q1. A strong acceleration in private consumption growth spearheaded the upturn, while a sharp rebound in fixed investment and robust public spending growth also bolstered the overall reading. Turning to Q3, demand dynamics have likely continued to improve, as evidenced by double-digit growth in both merchandise exports and imports during July–August. Moreover, tourist arrivals grew strongly in the same period, while the unemployment rate fell to an 18-month low in August, likely bolstering private consumption in the quarter. In politics, the country’s ruling coalition retained its majority in the parliamentary elections held on 26 September, with talks between the three associated parties set to take place over the coming weeks to form a government.

Iceland Economic Growth

This year, the economy is set to regain some of last year’s losses, before GDP growth accelerates in 2022: Higher private spending and a stronger external sector should drive the improvement, although lingering uncertainty over the evolution of the pandemic and its associated restrictions could continue to impact the all-important tourism industry next year. FocusEconomics panelists see the economy growing 3.5% in 2021 and 4.7% in 2022, which is down 0.3 percentage points from last month’s forecast.

Iceland Economy Data

2015 2016 2017 2018 2019
Population (million)
GDP per capita (USD)52,75460,75975,68475,78966,761
GDP (USD bn)17.420.225.626.423.8
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)21.317.810.8-1.1-6.3
Exports (G&S, annual variation in %)
Imports (G&S, annual variation in %)13.814.512.30.8-9.9
Retail Sales (annual variation in %)  -  
Unemployment Rate4.
Fiscal Balance (% of GDP)-0.812.40.60.8-1.0
Public Debt (% of GDP)  
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)5.1-8.0-
Policy Interest Rate (%)5.755.004.254.503.00
Stock Market (annual variation in %)38.0-6.74.7-5.624.5
Exchange Rate (vs EUR)141.3119.1124.3133.3135.8
Exchange Rate (vs EUR, aop)146.3133.7120.5127.6137.2
Current Account (% of GDP)
Current Account Balance (USD bn)
Trade Balance (USD billion)-0.6-1.2-2.2-2.2-1.3

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Iceland Facts

Value Change Date
Bond Yield3.45-0.99 %Dec 31
Exchange Rate121.1-0.52 %Jan 01

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