Iceland Economic Outlook
A small, tourism-driven economy with strong natural resources:
Iceland’s economy is unique due to its reliance on natural resources and tourism. Fishing and fish processing remain key industries, but the country has increasingly diversified into tourism, renewable energy, and financial services. Iceland's vast geothermal and hydroelectric energy resources provide cheap and sustainable power, attracting energy-intensive industries such as aluminum smelting.
Tourism boom and volatility:The tourism sector has become a major driver of economic growth, with Iceland attracting millions of visitors annually, particularly drawn to its natural landscapes and unique attractions like the Blue Lagoon and Northern Lights. However, the sector has proven vulnerable to external shocks, as seen during the COVID-19 pandemic when travel restrictions led to a sharp economic contraction.
Resilience and financial stability post-crisis:Iceland’s economy rebounded strongly after the 2008 financial crisis, when its banking sector collapsed. Strict financial regulations and a shift toward sustainable industries have since strengthened economic stability. However, inflationary pressures and reliance on tourism make the economy susceptible to global economic downturns.
Iceland’s economic outlook:The Icelandic economy is set to expand above the Western European average in the coming years, driven by tourism, renewable energy exports, and a growing technology sector. However, risks include fluctuations in visitor numbers, inflationary pressures, and global economic instability. Diversification into tech and sustainable industries will be key to long-term resilience.
Iceland's Macroeconomic Analysis:
Nominal GDP of USD 31.3 billion in 2023.
Nominal GDP of USD 33.5 billion in 2024.
GDP per capita of USD 87,128 compared to the global average of USD 10,589.
GDP per capita of USD 83,531 compared to the global average of USD 10,589.
Average real GDP growth of 3.7% over the last decade.
Average real GDP growth of 3.3% over the last decade.
Sector Analysis
In 2022, services accounted for 64.6% of overall GDP, manufacturing 9.3%, other industrial activity 22.2%, and agriculture 3.9%. Looking at GDP by expenditure, private consumption accounted for 50.0% of GDP in 2023, government consumption 25.7%, fixed investment 24.4%, and net exports -0.1%.International trade
In 2023, manufactured products made up 15.3% of total merchandise exports, mineral fuels 2.4%, food 44.6%, ores and metals 36.4% and agricultural raw materials 0.5%, with other categories accounting for 0.8% of the total. In the same period, manufactured products made up 66.4% of total merchandise imports, mineral fuels 13.2%, food 11.2%, ores and metals 8.0% and agricultural raw materials 1.1%, with other goods accounting for 0.1% of the total. Total exports were worth USD 6.90 billion in 2024, while total imports were USD 9.30 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 3.7% in the decade to 2023. To read more about GDP growth in Iceland, go to our dedicated page.
Fiscal policy
Iceland's fiscal deficit averaged 1.1% of GDP in the decade to 2023. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 4.2% in the decade to 2024. For more information on Iceland's unemployment click here.
Inflation
Inflation averaged 3.9% in the decade to 2024. Go to our Iceland inflation page for extra insight.
Monetary Policy
Iceland's monetary policy rate ended 2024 at 8.50%, up from 4.50% a decade earlier. See our Iceland monetary policy page for additional details.
Exchange Rate
From end-2014 to end-2024 the krona weakened by 8% vs the U.S. dollar. For more info on the krona, click here.
Economic situation in Iceland
GDP rose 0.6% overall in 2024 (2023: +5.6%), the weakest result since 2010—bar the pandemic-induced fall in 2020. However, the economy is likely off to a strong start so far in 2025, aided in part by a more favorable base of comparison. The data at hand is optimistic. Inflation averaged below Q4 in Q1; this, in turn, allowed the Central Bank to reduce rates further in March—bringing the cumulative cuts to 150 basis points since October 2024—likely supporting consumer confidence, which averaged above Q4 in Q1. All these favorable developments should have supported a positive private consumption outturn in Q1. Additionally, the external sector seemingly performed well, too: Goods exports growth was above that of Q4 in January–February. Less positively, hotel stays shrank year on year in the same two-month period.Iceland Economic Forecasts
Projections out to 2034.31 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 9 expert analysts.
Want to get insight on the economic outlook for Iceland in the coming years? FocusEconomics collects projections out to 2034 on 31 economic indicators for Iceland from a panel of 9 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Iceland economy. To download a sample report on the Iceland's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.