Iceland Economy Shrinks 0.6% in Q4

2026-02-27 09:27 By Mariene Camarillo 1 min. read

Iceland’s economy fell by 0.6% year-on-year in Q4 2025, following an upwardly revised 3.2% expansion in the previous quarter.

Gross fixed capital formation contracted sharply to -12.5% from 5.7%, weighed down by business sector investment (-15.3% vs 16.4%) and residential construction (-15.6% vs -10.3%).

At the same time, changes in inventories recorded a flat reading, compared with 1.8% in Q3..

Net trade also contributed negatively to GDP, with exports declining 5% as services dropped 4.3% from 7.2%, and goods fell 13.3% from 3.8%.

On the upside, consumer spending rose 5.5% from 4.7%, while government spending edged up 1.1% from 1%.

On a seasonally adjusted quarterly basis, the GDP shrank 0.8%, following an upwardly revised 1.3% growth in the preceding period.

For the full year, Iceland’s economy expanded 1.3%, compared with a 1.3% contraction in the previous year.



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Iceland Economy Shrinks 0.6% in Q4
Iceland’s economy fell by 0.6% year-on-year in Q4 2025, following an upwardly revised 3.2% expansion in the previous quarter. Gross fixed capital formation contracted sharply to -12.5% from 5.7%, weighed down by business sector investment (-15.3% vs 16.4%) and residential construction (-15.6% vs -10.3%). At the same time, changes in inventories recorded a flat reading, compared with 1.8% in Q3.. Net trade also contributed negatively to GDP, with exports declining 5% as services dropped 4.3% from 7.2%, and goods fell 13.3% from 3.8%. On the upside, consumer spending rose 5.5% from 4.7%, while government spending edged up 1.1% from 1%. On a seasonally adjusted quarterly basis, the GDP shrank 0.8%, following an upwardly revised 1.3% growth in the preceding period. For the full year, Iceland’s economy expanded 1.3%, compared with a 1.3% contraction in the previous year.
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