Iceland Economic Forecast

Iceland Economic Outlook

January 30, 2018

Leading indicators for the fourth quarter have been mostly positive, suggesting economic growth continued easing towards potential through year-end. The labor market appears to have rounded out the year in good shape, with tight conditions helped along by the crush of tourists that boosted the services sector. Tourism experienced another year of eye-watering annual growth, with tourist arrivals rising by nearly a quarter in 2017—to more than two million—despite the rapid appreciation of the krona following last year’s lifting of capital controls. On the other hand, exports have proven less resilient to the strengthening of the currency; an unexpected decline in exports dragged on otherwise upbeat growth in the third quarter.

Iceland Economic Growth

The economy is expected to continue slowing this year as the effects of the post-crisis boom continue wearing off. That said, positive spillovers from tourism into investment and consumption should moderate the slowdown and keep asset values elevated. A new, untested coalition government and the further krona-induced weakening of exports will lead downside risks. Our panelists expect GDP to grow 3.5% in 2018, which is up 0.2 percentage points from last month’s forecast, and 2.8% in 2019.

Iceland Economy Data

Population (million)
GDP per capita (USD)43,47846,01251,67251,05159,524
GDP (USD bn)
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)
Exports (G&S, annual variation in %)
Imports (G&S, annual variation in %)
Retail Sales (annual variation in %)
Unemployment Rate6.
Fiscal Balance (% of GDP)-3.7-1.8-0.1-0.812.9
Public Debt (% of GDP)92.584.782.468.153.2
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)1.1-4.4-0.75.1-8.1
Policy Interest Rate (%)
Stock Market (annual variation in %)16.827.511.638.0-6.7
Exchange Rate (vs EUR)168.9158.5154.3141.3119.1
Exchange Rate (vs EUR, aop)160.9162.2154.9146.3133.7
Current Account (% of GDP)-
Current Account Balance (USD bn)-
Trade Balance (USD billion)0.30.0-0.3-0.6-1.2

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Iceland Facts

Bond Yield5.14-0.99 %Feb 20
Exchange Rate110.6-0.52 %Feb 20
Stock Market1,376-0.32 %Feb 20

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