Iceland Economic Growth (Nominal GDP, ann. var. %)

Economic Growth in Iceland

GDP growth more than halved in the final three months of 2022. However, economic growth for the year as a whole accelerated to 6.4% (2021: +4.3%)—the best performance in the Nordic region and the fastest expansion in Iceland since 2007. The pickup was spearheaded by private consumption, which defied higher borrowing costs and soaring inflation. The external sector also played a key role: Exports of goods and services grew by over 20% in the year, and the tourism industry continued its post-pandemic recovery, with total hotel stays rising by over 200% on average in 2022. Moving on, 2023 likely started on a softer footing. In Q1, consumer sentiment gradually deteriorated—hitting a seven-month low in March—likely due to higher inflation, borrowing costs increasing at a quicker pace and a rise in the unemployment rate.