Despite modest changes in Gross Domestic Final Expenditure (GDFE), non-seasonally adjusted figures indicate a year over year increase in Gross Domestic Product (GDP) by 4.7% for the 4th quarter of 2019. Household Final Consumption Expenditure (HFCE) increased by 1.0%, Government Final Consumption Expenditure (GFCE) increased by 3.8% and Gross Fixed Capital Formation (GFCF) decreased by 3.0% year on year in Q4 2019. Taking into account the effects of changes in inventories, Gross Domestic Final Expenditure (GDFE) increased by 0.1% in Q4.
The increase in real GDP in the 4th quarter of 2019 is consequently explained by the positive impact of foreign trade. Imports decreased by 10.2% in Q4, while exports increased by 0.5%. Exports of goods decreased by 3.1%, but despite a significant decrease in exported tourism and related services, total service exports increased by 3.7% in Q4, explained by increased exports of other services, including business services and export of Intellectual Property Products services.
Preliminary estimate of annual national accounts, based on the estimation process of quarterly national accounts, indicate a 1.9% increase in GDP in real terms in 2019. For the year as a whole, the GDP growth in 2019 is largely due to a positive effect of foreign trade. Despite a 5% decrease in exports, decrease in imports proved to be considerably higher, or 9.9% in real terms.
GDP per capita decreased by 0.3% in 2019
Taking into account population growth, which was 2.2% in 2019, GDP per capita decreased by 0.3% in real terms, compared with 1.1% growth in 2018.
The national accounts for 2016-2018 have been revised based on new and more detailed data, including more detailed information on business sector investment. Revised national accounts show 3.8% GDP growth in 2018, compared to 4.8% according to previously published results (see further discussion below).
Contributions to growth by expenditure items
The economic growth in 2019 is mainly driven by a positive impact of foreign trade. Contribution of household final consumption and government final consumption is somewhat less.
Decrease in gross domestic final expenditure
Total domestic expenditure decreased by 0.1% in 2019. Household final consumption increased by 1.6%, government final consumption by 4.1% and gross fixed capital formation decreased by 6.3%. From 2011 to 2018, total domestic expenditure increased every year, or by 4.6 on average.
| Gross Domestic Product 2014-2019 | ||||||
| Million ISK, current prices | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
| Private final consumption | 1,093,250 | 1,146,570 | 1,235,928 | 1,317,491 | 1,421,844 | 1,506,682 |
| Government final consumption | 496,321 | 535,251 | 570,663 | 614,304 | 669,539 | 721,930 |
| Gross fixed capital formation | 356,531 | 444,994 | 525,894 | 575,341 | 600,910 | 599,665 |
| Changes in inventories | 2,045 | 3,489 | 2,926 | 754 | 11,063 | -2,733 |
| Gross domestic final expenditure | 1,948,147 | 2,130,304 | 2,335,411 | 2,507,890 | 2,703,356 | 2,825,543 |
| Exports of goods and services | 1,068,320 | 1,188,374 | 1,186,616 | 1,206,291 | 1,324,447 | 1,344,017 |
| Less: Imports of goods and services | 942,907 | 1,024,730 | 1,031,090 | 1,097,875 | 1,240,416 | 1,203,943 |
| Gross Domestic Product | 2,073,560 | 2,293,948 | 2,490,936 | 2,616,306 | 2,787,386 | 2,965,617 |
| Volume changes, % | ||||||
| Private final consumption | 3.2% | 4.5% | 7.2% | 8.1% | 4.7% | 1.6% |
| Government final consumption | 1.3% | 1.1% | 1.9% | 3.7% | 3.9% | 4.1% |
| Gross fixed capital formation | 15.9% | 21.3% | 17.8% | 10.8% | -1.1% | -6.3% |
| Changes in inventories | 0.4% | 0.0% | -0.1% | -0.1% | 0.3% | -0.5% |
| Gross domestic final expenditure | 5.3% | 6.7% | 8.0% | 7.5% | 3.5% | -0.1% |
| Exports of goods and services | 3.2% | 9.1% | 10.9% | 5.4% | 1.7% | -5.0% |
| Less: Imports of goods and services | 9.8% | 13.8% | 14.5% | 12.3% | 0.8% | -9.9% |
| Gross Domestic Product | 2.1% | 4.7% | 6.6% | 4.5% | 3.8% | 1.9% |
Gross fixed capital formation decreased in 2019
In the 4th quarter of 2019, business sector investment grew by 1.7% in real terms from the same period last year, while government investment decreased by 26.5%. The figures still show a considerable base effect of the transfer of ownership of the Hvalfjörður road tunnel in Q4 2018, as the state gained ownership of the tunnel with the associated positive impact on government investment. However, there is no impact on total GFCF as the increase in public investment is matched with a corresponding decrease in business sector investment.
Gross fixed capital formation (GFCF) decreased in real terms by 6.3% in 2019 compared with a 1.1% decrease in 2018. Business sector investment decreased by 17.5% in 2019, but according to revised figures, it decreased by 11.5% in 2018. Government investment decreased by 10.4% in 2019, compared with an increase of 30.6% in 2018.
Residential investment growth is slowing down
Residential investment increased in real terms by 31.2% in 2019 compared with 15.5% growth in 2018. According to quarterly estimates, growth in residential investment slowed somewhat in the latter half of the year as growth measured 12.7% in the fourth of 2019 compared to 52% in 3rd quarter.
Since 1999, residential investment has averaged 4% of annual GDP with its lowest point, 2.1%, in 2010. In 2019, residential investment amounted to 5.6% of GDP and has not been higher since the year 2007.
Private final consumption increased by 1.6% in 2019
Private final consumption increased in real terms by 1.0% in the 4th quarter of 2019 compared with the same quarter 2018, but by 1.6% over the year as a whole. This is a somewhat lower growth than has been measured on an annual basis in recent years. In comparison, private final consumption increased by an average of 5.5% in 2014-2018.
In per capita terms, private consumption decreased by 0.6% in 2019. Since 2009, real wages have increased by 41.1% and private consumption has increased by 39.6% in real terms. Private consumption per capita, on the other hand, has not increased as much in real terms, or by 23.7% since 2009.
Government final consumption increased by 4.1% in 2019
Government final consumption increased by 4.1% in real terms in 2019 compared with 3.9% in 2018. In 2017-2019, annual growth in government final consumption was 3.9% on average compared to a 0.2% annual average decrease in 2009-2016. Since 2009, government final consumption has increased by 11.5% in real terms. Public finances in Q4 2019 and preliminary results for 2019 will be published 13 March 2020.
Increased surplus of balance of trade in goods and services in 2019
Exports of goods and services increased by 0.5% in the 4th quarter of 2019 compared with the same quarter in 2018. Exports of goods decreased by 3.1% but despite a significant decrease in tourism-related exports service exports as a whole increased by 3.7%, explained by increased exports of other services, including business services and export of Intellectual Property Products services.
Import of goods and services decreased by 10.2% in the 4th quarter of 2019 compared with the same quarter in 2018. Import of goods decreased by 10.7% and import of services by 9.3%. In 2019 export of goods and services decreased on annual basis for the first time since 2006, or by 5% in real terms from previous year.
Total imports decreased by 10.2% in the 4th quarter of 2019 and by 9.9% over the year as a whole. Imports of goods decreased by 8.6% in 2019 and services imports by 12%. This is the first time since 2009 that imports have decreased between years. In 2010-2018 imports of goods and services increased by an average of 7.5% per year.
The balance of goods and services was positive by 43.9 billion ISK in the 4th quarter of 2019 and by 140 billion ISK for the year as a whole compared with 84 billion ISK in 2018 at current prices.
Decrease in inventories
Inventories decreased by 6 billion ISK at current prices in the 4th quarter of 2019 compared with previous quarter. Seafood products inventories decreased by 6.5 billion ISK, inventories of ferrosilicon and other primary industrial supplies also decreased slightly during the period, partly due to lower imports of alumina, but despite a decrease in aluminium production, aluminium inventories increased in the fourth quarter compared with the previous quarter. Inventories of Oil remained virtually unchanged in the 4th quarter of 2019 compared with the previous quarter but compared with the same quarter 2018 oil inventories decreased significantly, or by 2.3 billion ISK, at current prices. Over the year as a whole, total inventories decreased by 2.7 billion ISK in 2019 compared with more than 11 billion ISK increase in inventories in 2018, at current prices.
GDP by industries
In parallel with the publication of national accounts on the basis of the expenditure approach, figures based on the production approach are also published. In the production accounts, figures for 2017 are considered final, figures for 2018 are considered preliminary and figures for 2019 are first estimates.
Seasonally adjusted quarterly volume growth
Seasonally adjusted GDP in the 4th quarter of 2019 increased by 4.8% from the previous quarter. Private final consumption decreased by 0.2%, government final consumption increased by 0.7% and gross fixed capital formation decreased by 4.0%. Exports decreased by 10.6% and imports decreased by 5.0%.
| Quarterly national accounts, 4th quarter of 2019 | |||
| Current prices million ISK | Volume change on the same period of the previous year, % | Volume change from previous quarter,% | |
| 4th quarter | 4th quarter | 4th quarter | |
| Private final consumption | 401,640 | 1.0 | -0.2 |
| Government final consumption | 191,119 | 3.8 | 0.7 |
| Gross fixed capital formation | 155,276 | -3.0 | -4.0 |
| Changes in inventories | -5,984 | -1.0 | … |
| Gross domestic final expenditure | 742,051 | 0.1 | -1.8 |
| Exports of goods and services | 332,965 | 0.5 | 10.6 |
| Imports of goods and services | -289,106 | -10.2 | -5.0 |
| Gross domestic product | 785,910 | 4.7 | 4.8 |
Revised figures
The general rule for revision of Icelandic national accounts is that when the annual figures are published, in February and August, the results of the previous three-year period are open for revision. Other published figures are considered final but time series can be revised if necessary. In accordance with this revision policy, we now publish revised results for the years 2016-2018 parallel to the first estimates for 2019.
Revised results of business sector investment provide a somewhat different picture of developments in 2018 than preliminary figures indicated. According to previously published figures, business sector investment decreased by 4.1% in real terms in 2018, but according to revised figures based on register based data the decrease is considerably higher or 11.5% in real terms compared with the previous year.
Measurement of business sector investment is to a large extent based on changes in assets according to corporate tax returns data, but this information is only available with considerable time lag. Preliminary estimates are based on other accessible data sources, including data on VAT turnover and imports.
Planned benchmark revision and change of reference year
At the end of August 2020, a benchmark revision of national accounts is scheduled to be published. The revision is in accordance with Eurostat's policies and guidelines on benchmark revisions and their harmonized timing.
Particular emphasis is placed on the revision of the sectoral classification in accordance with the ESA 2010, especially with regard to the demarcation of the general government sector in Icelandic national accounts as well as methods used to deflate government final consumption. Concurrently with the benchmark revision, the reference year for chain-linked volumes will be 2015 instead of 2005, as has been the case since 2011. Further details of the revision will be reported in August.