Iceland Economic Forecast

Iceland Economic Outlook

December 20, 2018

The Icelandic economy slowed markedly in the third quarter, despite a robust performance from the crucial tourism sector which supported private outlays. The downswing was due exclusively to lower fixed investment, itself driven by a sharp contraction in business investment and a softer decline in residential construction investment. On the flipside, public investment surged in the quarter, both private and public spending growth picked up slightly, while the external sector’s growth contribution improved thanks to a rebound in exports, despite a marginal recovery in imports. Meanwhile, the country appears to be headed towards difficult wage negotiations in coming months, as the powerful labor unions push for steep minimum wage increases

Iceland Economic Growth

A fading tourism boom will likely cause the economy to slow next year. Softer momentum in the sector could also impact the construction and housing industries, hitting residential investment growth. Our panelists expect GDP to rise 2.7% in 2019, which is down 0.1 percentage points from last month’s forecast, and 2.6% in 2020.

Iceland Economy Data

20132014201520162017
Population (million)0.30.30.30.30.3
GDP per capita (USD)46,01251,67251,05159,52470,588
GDP (USD bn)15.017.017.020.024.0
Economic Growth (GDP, annual variation in %)4.32.24.37.53.6
Consumption (annual variation in %)0.83.24.77.17.8
Investment (annual variation in %)2.216.518.722.59.3
Exports (G&S, annual variation in %)6.73.29.210.94.8
Imports (G&S, annual variation in %)0.19.813.814.511.9
Retail Sales (annual variation in %)2.06.611.012.39.1
Unemployment Rate5.44.94.03.02.8
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 %)3.92.11.61.71.8
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)5.94.05.37.73.7
Current Account Balance (USD bn)0.90.70.91.50.9
Trade Balance (USD billion)0.0-0.3-0.6-1.2-2.2

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Iceland Facts

ValueChangeDate
Bond Yield5.49-0.99 %Jan 14
Exchange Rate120.7-0.52 %Jan 14
Stock Market1,227-0.32 %Jan 14

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