Iceland Economic Forecast

Iceland Economic Outlook

October 27, 2020

After suffering the second-sharpest contraction on record in Q2, the economy started to show tentative signs of recovery towards the end of Q3. Consumer confidence shot up in September from August’s near-decade low, while exports rebounded strongly in the same month to their highest value since October 2019. However, the unemployment rate ticked up to a four-month high in September, likely capping private consumption. Moreover, overnight stays decreased at a sharper rate in September than in August, pointing to a still-subdued tourism sector. Turning to Q4, new Covid-19-related restrictions were implemented in early October due to a rapid surge in new cases, which will likely hamper economic activity in the quarter. Meanwhile, on the political front, on 1 October, the government tabled the 2021 draft budget, which focuses on improving healthcare, welfare and education, while easing the tax burden.

Iceland Economic Growth

The pandemic will take a toll on tourism and trade this year, hammering GDP. In 2021, the economy is expected to recover as economies reopen globally and international travel resumes. However, uncertainty over the evolution of the pandemic lingers and clouds the outlook, posing a key downside risk to recovery. FocusEconomics panelists see the economy growing 4.7% in 2021, which is down 0.7 percentage points from last month’s forecast, and 3.8% in 2022.

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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