Results for the year 2023 indicate that gross domestic production (GDP) increased by 4.1% in volume with nominal level estimated at 4,279 billion ISK. In the fourth quarter, the growth of the economy slowed down, but the increase in GDP was 0.6% compared with the same quarter of the previous year. The seasonally adjusted change in GDP between the third and fourth quarters is 0.9% in real terms.

National Accounts figures for 2023
Statistics Iceland now publishes its preliminary estimates of the national accounts for 2023. The real increase in service exports by 9.8% year-over-year is the main driver of economic growth last year, but at the same time the trade balance and increased consumption also make a positive contribution. Gross domestic final expenditure (GDFE), the aggregate of household and government final consumption expenditure and gross fixed capital formation, is estimated to have increased by 1.2% in volume last year compared with 8.4% between 2021 and 2022.

Revision of previously published statistics for the years 2020-2022
Along with the publication of the GDP for the year 2023, the previously published figures for the years 2020-2022 have been revised. Economic growth in 2022 was thus 8.9% instead of 7.2% in previously published figures. In 2021, GDP growth was 5.1% (previously 4.5%) and in 2020 it is now estimated that GDP decreased by 6.9% in real terms from the previous year compared with a decrease of 7.2% in previously published figures. The biggest impact here is the review of the capital formation of the business sector, which was considerably underestimated in the previous editions. The revision of the statistics is based on updated and more accurate data on capital formation available towards the end of 2023. Also, a review of private consumption and exports had a minor effect on previously published figures.

Foreign trade
As previously mentioned, service exports were the main driver of economic growth last year. However, there was a clear turnaround in the fourth quarter, which can be attributed to the upheaval in Reykjanes. Service exports in the fourth quarter thus decreased by 5.5% in real terms after strong growth in the first three quarters. In the fourth quarter, there was also a sharp decline in product imports, which meant that the contribution of trade in goods and services to GDP was positive during the quarter. For the year as a whole, the balance of goods and services was negative by 2.2 billion ISK compared with a deficit of 6.3 billion ISK in 2022, which explains the positive contribution of foreign trade to GDP despite the deficit.

Significant decline in household consumption in the fourth quarter
Household final consumption expenditure decreased by 2.3% in the fourth quarter in real terms from the same period in the previous year, and for the year as a whole the estimated growth is 0.5% compared with 8.3% growth the year before. This is the lowest growth in private consumption since 2010, with the exception of 2020 when the Covid-19 pandemic hit. The components of private consumption that shrank the most in the fourth quarter are related to the purchase of vehicles, food, clothing and shoes and alcohol, as well as private consumption expenditures due to travel abroad, which continues to decline. Domestic consumption generally shrank, and household expectations were more pessimistic.

Government consumption expenditure increased by 2.9% in the fourth quarter
Estimated public consumption expenditure increased by 2.2% in real terms last year compared with 2.3% growth in 2022. The increase in public consumption in the fourth quarter of 2023 was 2.9%. Public sector finances will be discussed in more detail in a publication by Statistics Iceland on 14 March 2023.

Capital formation is shrinking
Gross fixed capital formation is estimated to have decreased by 0.6% in volume year-on-year compared with an increase of over 15% in the previous year. Looking at the fourth quarter, the decline in volume amounted to 7.6% from same period last year. The share of capital formation in GDP remains historically high at 23.7%. After strong business sector investment during 2021 and 2022 there was only 0.9% change in volume over the last year. Capital formation in 2021 and 2022 rose somewhat from the previous estimate, mostly in the investment of structures and rental cars. Capital formation in residential property is estimated at 195 billion ISK last year and there was a slight year-on-year decrease of 0.3%. Looking at the quarterly data, a turnaround in the fourth quarter of residential capital formation is revealed after a continuous decline in the previous quarters. According to data from HMS, the number of completed apartments in the whole country increased by a total of 3,065 apartments in the year 2023. It is estimated that public GFCF decreased last year by 6.1% in real terms compared with the year 2022.

Stock increase in marine products in 2023
In 2023, the total value of inventory increased by 29.6 billion ISK at the year's price level. The most important factor is the increase in the supply of marine products. There is also a decrease in oil inventories, while aluminum inventories, ferrosilicon and other consumables are increasing. In the fourth quarter, the total value of supplies decreased by 4.7 billion ISK at the year's price level between consecutive quarters, which can mostly be attributed to the decreasing inventory of marine products. Oil inventories also decreased but there is an increase in aluminum inventories, ferrosilicon and other consumables.

Hours worked increased by 4.1% and number of employed persons by 4.9%
It is estimated that the total number of hours worked increased by 4.1% year-on-year while the number of employed persons increased by 4.9% during the same period. The increase in hours worked last year is greater during the first half of the year, 5.2%, compared with 3.1% increase during the second half. A similar pattern applies to increase in number of employed persons. In the fourth quarter, it is estimated that the total number of hours worked increased by 2.1% compared with the same quarter last year. At the same time, the number of employed persons increased by 3.9%.

Revision of previously published results
The general rule for the revision of national accounts is that when the annual figures are published, in February and August, the results of three years are open for revision in addition to the current year.


Further Information

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