Iceland Economic Forecast

Iceland Economic Outlook

May 28, 2019

The economy looks set to plummet in the second quarter, after a likely battering in the first quarter. As in Q1, a sharp downturn in the pivotal tourism and fishing sectors will lead Q2’s tumble. In late March, WOW Air collapsed, while Icelandair continues to be plagued by the grounding of Boeing’s 737 MAX. Against this backdrop, tourist arrivals fell by nearly a fifth in April—the largest contraction on record—and airport traffic fell by more than a quarter; and the woes of the tourism sector seem set to drag on well into this quarter and beyond. Meanwhile, fishing vessels again failed to find any capelin—an economically important fish for the sector—in April, severely slashing the total catch volume for the month and weighing on exports in turn.

Iceland Economic Growth

Growth prospects for this year are rapidly disintegrating, with the collapse of inbound tourism amid WOW Air’s bankruptcy set to hammer the currency, employment, investment and exports. A no-deal Brexit and slower Eurozone growth are also main downside risks. Our panelists are still adjusting their forecasts to recent events, and further downgrades are likely in coming months. Met the why particular panelists expect GDP to rise 1.3% in 2019, which is down 1.0 percentage point 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 %)6.73.29.211.94.8
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)84.381.867.652.711.9
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 %)27.511.638.0-6.74.7
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 Yield4.09-0.99 %Jun 13
Exchange Rate125.4-0.52 %Jun 13
Stock Market1,447-0.32 %Jun 13

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