According to a revised economic forecast for 2017-18, from Statistics Iceland the gross domestic product of Iceland grew by 3.8% in 2017. GDP is expected to grow by 2.9% in 2018 and 2.5-2.8% in 2019-2023.The main drivers of growth will be domestic demand, mostly private consumption.
Inflation, which has remained at or below 2% is expected to peak at 2.9% in 2019 but will edge towards the Central Bank’s 2.5% inflation target in the latter half of the forecast period.
Read more: Icelandic GDP grew more in 2016 than initially believed: Growth was 7.4%
The Icelandic economy has been experiencing strong economic growth since 2012 when the economy entered its current expansion. The growth peaked in 2016 at 7.4%. Since then the economic boom, fueled by the explosive growth in the tourism industry, has begun to slow down. Statistics Iceland expects the economy to continue to grow for the foreseeable future, although at a slower pace than in recent years.
Low inflation indicates growth has slowed down sufficiently rapidly to avoid the economy overheating. It seems the Icelandic economy will avoid a hard landing after the boom in recent years.
Private consumption and investments drive growth
Last year's growth was driven by strong 7.7% growth in private consumption and a robust 9.3% increase in investments. The forecast for public consumption and investments is raised considerably due to updated government budget plans. Estimated export growth in 2017 is close to 3.5% and growth for imports of goods and services approximately 11%.
Investment is expected to grow by 1.3% in 2018 and on average by 3.6% in the following years. For 2018, public investment is forecast to increase by 12% and residential investment by 19%, while showing a more moderate growth in the remaining years. Export volume is estimated to grow by 2.5-4.1%, imports in the range of 2.4-5.7% and current account surpluses are expected to continue.
According to a revised economic forecast for 2017-18, from Statistics Iceland the gross domestic product of Iceland grew by 3.8% in 2017. GDP is expected to grow by 2.9% in 2018 and 2.5-2.8% in 2019-2023.The main drivers of growth will be domestic demand, mostly private consumption.
Inflation, which has remained at or below 2% is expected to peak at 2.9% in 2019 but will edge towards the Central Bank’s 2.5% inflation target in the latter half of the forecast period.
Read more: Icelandic GDP grew more in 2016 than initially believed: Growth was 7.4%
The Icelandic economy has been experiencing strong economic growth since 2012 when the economy entered its current expansion. The growth peaked in 2016 at 7.4%. Since then the economic boom, fueled by the explosive growth in the tourism industry, has begun to slow down. Statistics Iceland expects the economy to continue to grow for the foreseeable future, although at a slower pace than in recent years.
Low inflation indicates growth has slowed down sufficiently rapidly to avoid the economy overheating. It seems the Icelandic economy will avoid a hard landing after the boom in recent years.
Private consumption and investments drive growth
Last year's growth was driven by strong 7.7% growth in private consumption and a robust 9.3% increase in investments. The forecast for public consumption and investments is raised considerably due to updated government budget plans. Estimated export growth in 2017 is close to 3.5% and growth for imports of goods and services approximately 11%.
Investment is expected to grow by 1.3% in 2018 and on average by 3.6% in the following years. For 2018, public investment is forecast to increase by 12% and residential investment by 19%, while showing a more moderate growth in the remaining years. Export volume is estimated to grow by 2.5-4.1%, imports in the range of 2.4-5.7% and current account surpluses are expected to continue.
