Iceland Economy Returns to Growth in Q1

Iceland’s economy expanded 2.7% year-on-year in the first quarter of 2026, rebounding from a 0.6% contraction in the previous quarter. Net trade contributed positively to GDP, with exports rising 1% after a 5% decline, as services growth accelerated (6.9% vs 4.3%) and goods exports declined at a slower pace (-3.9% vs -13.3%). Meanwhile, imports fell further by 8% following a 4.2% decline. At the same time, gross capital formation contracted less sharply (-12% vs -12.5%), while changes in inventories rose 1.1% after stagnating in Q4 2025. In contrast, government spending growth eased to 0.8% from 1.1%, while consumer spending slowed to 2.2% from 5.5%. On a seasonally adjusted quarterly basis, GDP jumped 3.7%, recovering from a 0.8% contraction in the preceding period.

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.

Iceland’s economy expanded by 1.2% year-on-year in Q3 2025, rebounding from a revised 0.2% contraction in the previous three-month period. The main contributor to growth was household final consumption, which grew 4.2%, mainly on the back of increased spending on service-related goods. At the same time, gross fixed capital formation and government consumption rose 2.2% and 0.9%, respectively. Meanwhile, net external demand had an estimated negative contribution of 4.5% to growth, reflecting a widening trade deficit with exports up 2.6% and imports climbing 13.5%. On a seasonally adjusted quarterly basis, the GDP shrank by 0.2% in Q3, after a revised 0.4% decline in the prior period.