Iceland Economic Forecast

Iceland Economic Outlook

August 28, 2018

The economy likely performed well in the second quarter, after growth hit an over one-year high in the first quarter, although it showed signs of weakness. The unemployment rate remained low in Q2, and real wages continued to grow in annual terms, which should have supported private consumption. However, real wage growth slowed to a 14-month low in June, before ticking up slightly in July. Moreover, the tourism sector appeared to wobble in Q2, as overnight stays decreased compared to the same period last year, possibly due to a strong Icelandic króna. In June, consumer confidence fell to the lowest level of optimism since September 2015.

Iceland Economic Growth

This year, economic growth should moderate somewhat as the tourism sector loses some steam, weighing on private consumption and investment. The strong króna could also drag on tourists’ spending and soften the external sector’s momentum. Our panelists expect GDP to rise 3.2% in 2018, which is down 0.1 percentage points from last month’s forecast, and 3.0% in 2019.

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 Yield5.82-0.99 %Sep 20
Exchange Rate119.9-0.52 %Sep 20
Stock Market1,266-0.32 %Sep 20

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