Iceland Economic Outlook
June 2, 2020
The economy contracted 1.2% in annual terms in Q1 according to recent data, as a sharp decline in tourism hit the external sector. However, the domestic economy held up, with private consumption, government consumption and investment all rising. The downturn in Q2 will likely be significantly sharper, despite the easing of containment measures in May. Overnight stays fell 96% year-on-year in April on a collapse in international travel and will continue to contract until consumer confidence and international mobility is fully restored. Moreover, in April, employment levels and hours worked dropped off notably as the unemployment rate hit a multi-year high, which will be hampering domestic demand. Citing a widening budget deficit and sour short-term economic prospects, Fitch Ratings revised Iceland’s credit rating outlook from ‘A’ stable to ‘A’ negative in May.Iceland Economic Growth
The economy will decline sharply this year, weighed on by a collapse in tourism. However, fiscal and monetary support should prop up activity somewhat. The potential for a slow recovery in visitor arrivals is a key downside risk. FocusEconomics panelists currently see the economy contracting 7.4% in 2020, which is down 0.2 percentage points from last month’s forecast, and expanding 4.4% in 2021.Iceland Economy Data
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Iceland Facts
| Value | Change | Date | |
|---|---|---|---|
| Bond Yield | 3.45 | -0.99 % | Dec 31 |
| Exchange Rate | 121.1 | -0.52 % | Jan 01 |
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