Iceland Economic Forecast

Iceland Economic Outlook

April 30, 2019

The economy appears to have taken a hit in the first quarter, reflecting a poor performance in the key sectors of fishing and tourism. The total fish catch nosedived through the quarter as vessels failed to find any capelin, one of the industry’s primary exports by volume. Turning to tourism, data shows a slight decline in overnight stays in January and February, while March traffic data for the island’s main airport corroborates a slowdown in the sector in the quarter. Moreover, the tourism sector’s woes will likely be amplified, in Q2 and beyond, by the recent collapse of low-cost airline WOW Air on 28 March. The Central Bank said the collapse will likely dent economic growth noticeably, though it does not pose a serious risk to financial stability.

Iceland Economic Growth

Economic growth is expected to slow markedly this year as the country’s tourism boom fades, which will likely weigh particularly on residential investment and the construction sector. Furthermore, a marked slowdown in the Eurozone, Iceland’s main trade partner, remains a principal downside risk to the outlook. Our panelists expect GDP to rise 2.3% in 2019, which is down 0.4 percentage points from last month’s forecast, and 2.6% in 2020.

Iceland Economy Data

Population (million)
GDP per capita (USD)46,01251,67251,05159,52470,588
GDP (USD bn)
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)2.216.518.722.59.3
Exports (G&S, annual variation in %)
Imports (G&S, annual variation in %)0.19.813.814.511.9
Retail Sales (annual variation in %)2.06.611.012.39.1
Unemployment Rate5.
Fiscal Balance (% of GDP)-1.8-0.1-0.812.61.5
Public Debt (% of GDP)84.381.867.652.740.9
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)-4.4-0.75.1-8.1-4.6
Policy Interest Rate (%)6.004.505.755.004.25
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)
Current Account Balance (USD bn)
Trade Balance (USD billion)0.0-0.3-0.6-1.2-2.2

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Iceland Facts

Bond Yield4.25-0.99 %May 13
Exchange Rate122.8-0.52 %May 13
Stock Market1,477-0.32 %May 13

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