Iceland Economic Forecast

Iceland Economic Outlook

January 29, 2019

Economic momentum likely remained weak in the last quarter of 2018, following a marked deceleration in Q3 due largely to a sharp contraction in business and residential investment. Indeed, the tourism sector appears to have cooled in Q4, though the krona’s sharp fall in the quarter could support the sector going forward. While overnight tourist stays posted strong year-on-year growth in October, they were flat in November, pushing down occupancy rates as supply expanded. Moreover, airport data for December also suggests more muted tourism activity in the month. On the flipside, the labor market remained tight, with real wage growth increasing at a solid pace throughout 2018 despite softening in Q4.

Iceland Economic Growth

Growth should slow this year as the tourism boom fades. Softer momentum in the sector could also impact the construction and housing industries, undermining residential investment growth. Our panelists expect GDP to rise 2.7% in 2019, which is unchanged 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 Yield5.23-0.99 %Jan 30
Exchange Rate119.5-0.52 %Jan 30
Stock Market1,277-0.32 %Jan 30

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