Iceland Economic Forecast

Iceland Economic Outlook

October 23, 2018

After reaching a one-and-a-half year high in the second quarter—thanks to private consumption and residential construction investment—economic growth should have remained robust in the third quarter, particularly thanks to solid inflows of tourists during the country’s high season. Although overnight stays were stable year-on-year in June and July—due to a high base effect from 2017’s strong performance—they increased more than 11% in August. Meanwhile, the recently unveiled 2019 draft budget calls for a large expenditure increase while maintaining a sizable budget surplus, with new spending focused on infrastructure, healthcare, housing and social support.

Iceland Economic Growth

Growth should moderate overall in 2019 and 2020 due to slowing private consumption—as slack eventually develops in the labor market— though tourism and infrastructure-related investment will likely remain robust. Our panelists expect GDP to rise 2.9% in 2019, which is down 0.1 percentage points from last month’s forecast, and 2.8% in 2020.

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 Yield5.84-0.99 %Nov 15
Exchange Rate124.0-0.52 %Nov 15
Stock Market1,266-0.32 %Nov 15

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