Iceland Economic Forecast

Iceland Economic Outlook

May 31, 2022

GDP likely grew at a robust pace in Q1 2022. Private spending should have increased thanks to the complete removal of Covid-19 restrictions in February, coupled with unemployment falling to its pre-pandemic level. Moreover, the recovery of the tourism sector continued, with total hotel stays and foreigner growing hugely year on year in the quarter. Turning to Q2, momentum is likely weakening. In April, the spike in global commodity prices pushed up producer prices to an over decade high, hitting the industrial and external sectors. The tourism industry is also now feeling the impact of the Ukraine war: Annual growth of total hotel stays and foreigner stays softened in April. Meanwhile, red-hot inflation threatens to offset the boost to activity from the fall in unemployment registered in April by dampening household spending in Q2.

Iceland Economic Growth

Growth will be stable this year, virtually unchanged from 2021’s level. Stronger export growth—especially in the fishing and aluminum sectors—will drive the expansion. Public and private spending and a recovery in tourism will also support activity. Still, renewed pandemic restrictions amid new Covid-19 strains and slowdown among major trading partners cloud the outlook. FocusEconomics panelists see the economy growing 4.2% in 2022, which is down 0.1 percentage points from last month’s forecast, and 3.2% in 2023.

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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