Iceland Economic Outlook
December 23, 2021Economic activity slowed slightly in the third quarter, but still posted a healthy annual growth rate of 6.0% (Q2: +6.7% yoy). The slowdown was driven by a broad-based easing of domestic demand, with growth in both consumer and capital spending falling from Q2’s elevated levels, and government spending growth easing to its lowest level in nearly five years. Turning to Q4, while unemployment rose in October, it remained well below its 2020 level, and tourist arrivals once again surged, likely boosting consumer spending at the outset of the quarter. Meanwhile, in late November the incumbent coalition reached a deal to continue governing together for another four years. This ensures the continuation of Prime Minister Katrin Jakobsdottir’s green agenda, which includes a 55% reduction in greenhouse emissions by 2030 and a focus on green jobs creation.
Iceland Economic GrowthIn 2022, activity is set to gain steam after 2021’s projected rebound: Higher private spending and a stronger external sector should drive the improvement, although ongoing uncertainty over the evolution of the pandemic and associated travel-related restrictions is a continued downside risk to the all-important tourism industry in the coming year. FocusEconomics panelists see the economy growing 5.0% in 2022, which is up 0.1 percentage points from last month’s forecast, and 3.2% in 2023.
Iceland Economy Data
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|Bond Yield||3.45||-0.99 %||Dec 31|
|Exchange Rate||121.1||-0.52 %||Jan 01|
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