Last updated: September 15, 2026
Iceland’s economic activity has experienced notable volatility, with real GDP growth swinging between a contraction of -1.71% in Q4 2024 and a expansion of 3.68% in Q1 2026, before moderating to 0.3% in Q2 2026. The broader economic momentum is reflected in the output gap, which shows the economy operating below its potential with spare capacity; the output gap moved from 2.54% in 2023 to -1.88% in 2024, -3.51% in 2025, and is projected at -4.37% in 2026 and -4.42% in 2027. Meanwhile, the labor market has seen unemployment edge upward, moving from 5.4% in December 2025 to 5.8% in July 2026.
Price pressures have remained persistent, with CPI inflation registering 4.49% in December 2025, peaking at 5.4% in March 2026, and standing at 5.18% in June 2026. In response to these elevated price pressures, the Central Bank of Iceland has tightened monetary policy, raising its policy rate from 7.25% in January and February 2026 up to 8.0% by August 2026.
Looking at public finances, government revenue moved across a range between 475.7 billions of national currency in Q1 2024 and 552.26 billions of national currency in Q4 2025, while government expenditure ranged from 482.62 billions of national currency in Q1 2024 to 605.22 billions of national currency in Q4 2025. No official government debt figures or budget balance data are available.
No sector balance data is available for Iceland.
In foreign trade, Iceland runs a persistent trade deficit as goods imports consistently outpace goods exports. Goods exports to the world grew from 4,522.5 millions of national currency in 2020 to 7,187.52 millions of national currency in 2025, while goods imports from the world expanded from 4,267.49 millions of national currency in 2020 to 10,958.24 millions of national currency in 2025.
Energy and input costs present a mixed picture. Net electricity imports stood at 0.0 billion kWh annually from 2017 to 2024, indicating complete self-sufficiency in electricity. Similarly, dry natural gas imports remained at 0.0 billion cubic feet annually from 2017 to 2024. However, global input costs have fluctuated, with the Brent crude oil price moving from $61.81 per barrel in December 2025 to a peak of $103.84 per barrel in May 2026, before settling at $83.73 per barrel in July 2026. Additionally, the EU natural gas price rose from $9.46 in December 2025 to $17.93 in July 2026, posing potential imported cost pressures.
No currency value data against the IMF Special Drawing Right basket is available for Iceland.
Overall, Iceland's economy is navigating a period of below-potential output and rising unemployment alongside persistent inflation that has prompted aggressive policy rate hikes by the Central Bank of Iceland. While export growth continues, widening trade deficits and fluctuating global energy input costs underscore ongoing external exposures.
This bulletin is generated with AI assistance from the structured economic data collected across this site (national accounts, sector accounts, trade, energy and currency data). It is intended as an accessible summary, not investment advice — figures may be revised as underlying data sources are updated. For the detailed underlying series, see the Nation Account Data and Economic Data sections in the menu above.