Iceland

Iceland Economic Forecast

Iceland Economic Outlook

The economy tapped on the breaks in Q2, when GDP growth ebbed to 4.5% year on year (Q1: +7.1% yoy). The moderation was nearly broad-based: Year-on-year growth in goods and services exports, government spending and private consumption decelerated in Q2 from Q1. However, fixed investment returned to growth, expanding 1.6% despite elevated interest rates (Q1: -0.8% yoy) and preventing a sharper GDP slowdown. Additionally, price pressures eased slightly in Q2 from Q1, and the unemployment rate decreased, providing some support to spending. Moving to Q3, the outlook is rosier: Inflation was lower in July–August than in Q2, and the unemployment rate dropped from Q2 in July, alleviating further pressure on household budgets. Less positively, in July, hotel stays fell year on year for the first time since March 2021; it seems that the tourism sector is no longer recovering from the pandemic.

Iceland Inflation

In August, inflation inched up to 7.7% from July’s 7.6% due to stronger price increases for transport, which more than offset softer price pressures for food and housing and utilities. This year, inflation will ebb only marginally from 2022’s level and average over three times higher than the Central Bank’s 2.5% target. It will also be by far the highest in the region in 2023.

This chart displays Economic Growth (GDP, annual variation in %) for Iceland from 2013 to 2022.

Iceland Economic Data

2018 2019 2020 2021 2022
Population (million) 0.3 0.4 0.4 0.4 0.4
GDP (USD bn) 26.3 24.7 21.6 25.6 28.1
GDP per capita (USD) 75,524 69,127 59,267 69,371 74,609
GDP (EUR bn) 22.3 22.0 18.9 21.6 26.7
GDP per capita (EUR) 64,066 61,757 51,915 58,667 70,945
GDP (ISK bn) 2,844 3,026 2,920 3,250 3,797
Economic Growth (Nominal GDP, ann. var. %) 7.6 6.4 -3.5 11.3 16.8
Economic Growth (GDP, ann. var. %) 4.9 1.9 -7.2 4.5 7.2
Private Consumption (ann. var. %) 4.8 1.7 -3.4 7.1 8.5
Government Consumption (ann. var. %) 4.7 3.9 5.2 2.3 2.2
Fixed Investment (ann. var. %) 2.3 -4.1 -7.4 10.8 7.6
Exports (G&S, ann. var. %) 0.4 -5.3 -31.0 14.6 22.3
Imports (G&S, ann. var. %) -0.9 -9.1 -20.6 19.9 19.9
Unemployment (% of active population, aop) 3.1 3.9 6.4 6.0 3.8
Fiscal Balance (% of GDP) 1.0 -1.6 -8.9 -8.5 -4.1
Public Debt (% of GDP) 63.2 66.6 77.8 75.6 68.7
Inflation (CPI, ann. var. %, aop) 2.7 3.0 2.8 4.4 8.3
Key Interest Rate (% eop) 4.50 3.00 0.75 2.00 6.00
Exchange Rate (ISK per USD, eop) 116 121 127 130 143
Exchange Rate (ISK per USD, aop) 108 123 135 127 135
Exchange Rate (ISK per EUR, eop) 133 136 156 148 152
Exchange Rate (ISK per EUR, aop) 128 137 155 150 142
Current Account Balance (EUR bn) 0.9 1.4 0.2 -0.6 -0.5
Current Account Balance (% of GDP) 4.3 6.5 0.9 -3.0 -2.0
Merchandise Trade Balance (EUR bn) -1.8 -1.2 -0.9 -1.4 -2.1
Foreign Direct Investment (EUR bn) -0.3 -0.2 -0.8 0.1 0.6

Free Sample Report

Interested in Iceland economic reports, analysis and data? FocusEconomics provides data, forecasts and analysis for hundreds of countries and commodities. Request your free sample report now.

Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest