In 2024, GDP growth slowed down after significant growth in previous years. According to national accounts, gross domestic product increased by 0.5% in 2024. GDP growth is expected to reach 1.8% in 2025, driven by rising domestic demand while the growth contribution from net exports will be negative. In 2026, GDP is set to increase by 2.7%, mainly due to improvements in foreign trade and increased private consumption. Broad-based growth of 2.8% is projected in 2027.
Inflation has decreased in recent months and in February, the consumer price index increased by 4.2% from the previous year. Housing has been the main driver of inflation, but excluding housing, the consumer price index increased by 2.7% in February. Inflation is set to decrease further. Economic growth has eased, long-term wage agreements have created predictability in wage developments, and the housing market has slowed down. This year, the consumer price index is expected to increase by an average of 3.5% year-on-year. In 2026, inflation is forecast to reach 2.7% on average, and to remain close to the inflation target thereafter
Unemployment averaged 3.4% in 2024, according to the Labour Market Survey by Statistics Iceland. Indicators suggest that unemployment is on the rise, with registered unemployment increasing. A further increase in unemployment is projected this year, reaching an average of 4.0% and 4.1% in 2026. Long-term collective wage agreements have been signed for most of the labour market. The forecast assumes that wage developments will align with agreed wage increases, with the real wage index expected to rise by 2.7% this year and 1.7% in 2026.
The last economic forecast was published on the 4th of November 2024. The next forecast is scheduled for June 2025.
Economic forecast — Statistical Series