Iceland Economic Forecast

Iceland Economic Outlook

September 1, 2020

The economy is set to have contracted sharply in the second quarter, as a result of containment measures at home and abroad, while the tourism sector—a key contributor to Iceland’s GDP—was badly affected in Q2 as international travel collapsed. Turning to Q3, overnight stays continued to collapse in July compared to last year, albeit at a slower pace than in Q2, likely due to strict testing and quarantine measures upon arrival. More positively, the unemployment rate continued to dip in July, which should be helping to revive private consumption somewhat. Low interest rates and fiscal measures should also be supporting the recovery. Less positively, preliminary figures show the total fish catch decreased 6% in annual terms in July, following June’s surge.

Iceland Economic Growth

The economy will contract sharply this year, dragged down by a collapse in tourism and a fall in marine product exports. However, fiscal and monetary stimulus should support activity somewhat. Uncertainty over a second wave of Covid-19 cases and a subsequent reinstatement of international travel restrictions is a key risk to the outlook. FocusEconomics panelists currently see the economy contracting 8.0% in 2020, which is up 0.1 percentage points from last month’s forecast, before expanding 4.6% in 2021.

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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