Iceland Economy Contracts 1.1% in Q2

2026-08-31 09:19 By Mariene Camarillo 1 min. read

Iceland’s economy fell by 1.1% year-on-year in the second quarter of 2026, following an upwardly revised 3.8% expansion in the previous quarter.

The contraction was mainly driven by weaker net trade in goods, with exports plunging 7.3% from a 0.7% rise, weighed down by a decline in services exports (-1.1% vs 5.7% in Q1), while goods exports fell at a faster pace (-13.8% vs -3.5%).

Meanwhile, imports rebounded to 0.2% from a 9.3% drop, lifted by a recovery in goods imports (1.4% vs -13.9%), which offset a sharper decline in services imports (-2.0% vs -1.0%).

Moreover, consumer spending growth moderated to 0.8%, down from 1.7% in Q1, while changes in inventories declined to -0.8% from 1.5%.

In contrast, gross fixed capital formation rebounded sharply to 5.7% from a 10.4% fall a quarter earlier.

On a seasonally adjusted quarterly basis, GDP dropped 3.0% in Q2, following a 3.7% growth in the preceding period.



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Iceland Economy Contracts 1.1% in Q2
Iceland’s economy fell by 1.1% year-on-year in the second quarter of 2026, following an upwardly revised 3.8% expansion in the previous quarter. The contraction was mainly driven by weaker net trade in goods, with exports plunging 7.3% from a 0.7% rise, weighed down by a decline in services exports (-1.1% vs 5.7% in Q1), while goods exports fell at a faster pace (-13.8% vs -3.5%). Meanwhile, imports rebounded to 0.2% from a 9.3% drop, lifted by a recovery in goods imports (1.4% vs -13.9%), which offset a sharper decline in services imports (-2.0% vs -1.0%). Moreover, consumer spending growth moderated to 0.8%, down from 1.7% in Q1, while changes in inventories declined to -0.8% from 1.5%. In contrast, gross fixed capital formation rebounded sharply to 5.7% from a 10.4% fall a quarter earlier. On a seasonally adjusted quarterly basis, GDP dropped 3.0% in Q2, following a 3.7% growth in the preceding period.
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