Iceland Economic Forecast

Iceland Economic Outlook

November 21, 2017

Iceland’s economy has remained upbeat in recent months despite adjusting to slower GDP growth. The tourism sector, which experienced double-digit growth in the year through September, helped unemployment reach a near-decade low in Q3 and contributed to higher disposable incomes. In turn, household spending rose and imports surged in October. Furthermore, while the strengthening of the krona has made imports cheaper, it has hobbled exports and weighed on GDP growth. Since 28 October’s snap elections, in which the Independence Party lost its governing majority but remained the largest bloc, messy coalition talks have so far left the Left-Green Party with the strongest chances of leading a three-party coalition government which would include Independence.

Iceland Economic Growth

A further cool-off is expected next year as the economy approaches sustainable growth, although positive spillovers from the tourism sector should moderate the slowdown. Weaker business investment is expected to be offset by stronger residential investment over the medium term. Our panelists expect GDP to expand 3.3% in 2018, which is unchanged from last month’s forecast, and 2.7% in 2019.

Iceland Economy Data

20122013201420152016
Population (million)0.30.30.30.30.3
GDP per capita (USD)43,47846,01251,67251,05159,524
GDP (USD bn)14.015.017.017.020.0
Economic Growth (GDP, annual variation in %)1.24.41.94.17.2
Consumption (annual variation in %)2.01.02.94.36.9
Investment (annual variation in %)5.32.216.017.822.7
Exports (G&S, annual variation in %)3.66.73.29.211.1
Imports (G&S, annual variation in %)4.60.19.813.514.7
Retail Sales (annual variation in %)4.32.06.611.012.3
Unemployment Rate6.05.45.04.03.0
Fiscal Balance (% of GDP)-3.7-1.8-0.1-0.812.9
Public Debt (% of GDP)92.584.782.468.153.2
Inflation Rate (CPI, annual variation in %)5.23.92.11.61.7
Inflation (PPI, annual variation in %)1.1-4.4-0.75.1-8.1
Policy Interest Rate (%)6.006.004.505.755.00
Stock Market (annual variation in %)16.827.510.638.0-6.7
Exchange Rate (vs EUR)168.9158.5154.3141.3119.1
Exchange Rate (vs EUR, aop)160.9162.2154.9146.3133.7
Current Account (% of GDP)-3.96.24.05.38.1
Current Account Balance (USD bn)-0.50.90.70.91.6
Trade Balance (USD billion)0.30.0-0.3-0.6-1.2

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Iceland Facts

ValueChangeDate
Bond Yield4.83-0.99 %Dec 06
Exchange Rate104.6-0.52 %Dec 06
Stock Market1,288-0.32 %Dec 06

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