Iceland Economic Forecast

Iceland Economic Outlook

August 27, 2019

While firm GDP figures are still outstanding, Q2 was likely a quarter to forget for Iceland’s economy. Tourist arrivals plunged year-on-year in the period, hit by WOW Air’s bankruptcy, while the unemployment rate spiked and real wage growth fell to a multi-year low—likely having a knock-on effect on private consumption. Moreover, the total fish catch fell roughly 20% in annual terms on lower fish stocks, which likely hurt the external sector. Early signs for the third quarter are similarly downbeat: In July, tourist arrivals fell by double digits and wage growth moderated further relative to the Q2 average. More positively, the total fish catch edged up in July, while recent Central Bank easing should be providing some support to domestic activity.

Iceland Economic Growth

Panelists see the economy nearly flatlining this year on turbulence in the tourism sector, which will hit employment and construction, and a disappointing fish catch in H1. However, the weaker krona, a looser monetary stance and fiscal support should prop up activity. A possible sharper-than-expected tourism downturn, Brexit and slowing global growth pose downside risks. FocusEconomics panelists expect GDP to rise 0.1% in 2019, which is unchanged from last month’s forecast, and 2.1% in 2020.

Iceland Economy Data

20132014201520162017
Population (million)0.30.30.30.30.3
GDP per capita (USD)49,08456,49452,75460,75975,699
GDP (USD bn)15.818.417.420.225.6
Economic Growth (GDP, annual variation in %)4.12.14.76.64.6
Consumption (annual variation in %)0.93.24.57.28.1
Investment (annual variation in %)2.215.921.317.811.6
Exports (G&S, annual variation in %)6.73.29.110.95.4
Imports (G&S, annual variation in %)0.19.813.814.512.5
Retail Sales (annual variation in %)2.06.611.012.39.1
Unemployment Rate5.44.94.03.02.8
Fiscal Balance (% of GDP)-1.8-0.1-0.812.40.5
Public Debt (% of GDP)81.878.865.051.243.1
Inflation Rate (CPI, annual variation in %)3.92.11.61.71.8
Inflation (PPI, annual variation in %)-4.4-0.75.1-8.0-4.7
Policy Interest Rate (%)5.384.505.755.004.25
Stock Market (annual variation in %)27.510.638.0-6.74.7
Exchange Rate (vs EUR)158.5154.3141.3119.1124.3
Exchange Rate (vs EUR, aop)162.2154.9146.3133.7120.5
Current Account (% of GDP)5.93.85.27.73.5
Current Account Balance (USD bn)0.90.70.91.60.9
Trade Balance (USD billion)0.0-0.3-0.6-1.2-2.2

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Iceland Facts

ValueChangeDate
Bond Yield3.66-0.99 %Sep 04
Exchange Rate126.2-0.52 %Sep 04
Stock Market1,437-0.32 %Sep 04

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