A new issue of Statistical Series, presenting an economic forecast for 2023–2028, is now available.
Iceland‘s GDP is forecast to grow by 4% this year and by 2.5% in 2024. Last year's economic growth was driven by domestic demand, but this year the contribution of net exports to GDP growth is expected to increase. In the first quarter, GDP increased by 7% from the previous year, but growth is expected to slow down as the year progresses.
Wage increases and high population growth supported private consumption at the beginning of the year. Growth in private consumption is expected to slow down in the coming quarters. It is estimated that private consumption will grow by 2.3% this year and 2.2% in 2024. Public consumption is expected to grow by 2% this year and 1.7% in 2024.
Business investment has increased rapidly in the last two years but growth is set to slow down and is expected to be 3.5% this year and 3.7% in 2024. Housing investment is forecast to increase by 5.2% this year and 3.2% in 2024. Public investment is expected to decrease by 5.3% this year and grow by 2.1% next year.
The contribution of net exports to GDP growth was positive in the first quarter. Similar to the development in the past two years, the increase in exports is mainly driven by greater activity in the tourist sector. Exports are forecast to grow by 8.3% this year and by 3.3% in 2024.
Inflation rose at the beginning of the year and is set to decline gradually to 8.7% on average in 2023. Inflation is expected to abate next year, with inflation declining in neighbouring countries and a cooling economy. In 2024, the consumer price index is forecast to increase by 4.9%.
Unemployment averaged 3.9% in the first five months of the year, according to the Labor Market Survey. It is estimated that unemployment will average 3.7% this year and increase next year to 4%. Real wages are expected to rise as inflation declines. Collective wage agreements expire at the beginning of 2024 and there is considerable uncertainty about wage trends in the coming years.
The last economic forecast was published on the 29th of March 2023. The next forecast is scheduled for November 2023. The forecast is based on data available in end of May.
Economic forecast— Statistical Series