Iceland Economic Forecast

Iceland Economic Outlook

July 24, 2018

After hitting an over one-year high in the first quarter, growth in the second quarter was likely robust, thanks largely to the dynamism of the tourism sector, which is now in its high season. After a disappointing start in April, overnight stays grew robustly in May. The sector likely contributed to the decrease in unemployment observed in May—which should continue to support wage growth—while also benefiting residential construction investment, which had surged in Q1. However, the external sector probably detracted from growth due to higher imports of fuel, ships and aircrafts, while fish catch volumes in May and June showed some weakness.

Iceland Economic Growth

Economic activity should moderate somewhat this year as growth in tourism softens from last year’s exceptional gains, leading to lower growth in private consumption and investment. The strong krona will also likely drag on tourists’ spending and soften the external sector’s momentum. Our panelists expect GDP to rise 3.3% in 2018, unchanged from last month’s forecast, and 3.0% in 2019.

Iceland Economy Data

Population (million)
GDP per capita (USD)46,01251,67251,05159,52470,588
GDP (USD bn)
Economic Growth (GDP, annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)2.216.518.722.59.3
Exports (G&S, annual variation in %)
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.
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 %)
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)
Current Account Balance (USD bn)
Trade Balance (USD billion)0.0-0.3-0.6-1.2-2.2

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Iceland Facts

Bond Yield5.58-0.99 %Aug 15
Exchange Rate119.3-0.52 %Aug 15
Stock Market1,282-0.32 %Aug 15

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