Prepare for landing: Updated macroeconomic forecast 2017-2019
The Icelandic economy has been buoyant in the past few years, after the deep recession of the late 2000s. The upward cycle peaked with 7.2% output growth in 2016. We estimate year-2017 growth at 4.1% and project a growth rate of 2.3% in both 2018 and 2019.
Households will be the main driver of growth for much of the forecast horizon. Private consumption and residential investment have taken the reins from services exports and business investment, although services exports will continue to grow strongly in coming years.
Our estimates indicate that year-2017 GDP growth was in line with the global average. According to the new economic forecast from the IMF, the outlook for Iceland is for a growth rate slightly below the global average in 2018 and 2019 but in line with the average for industrialised economies.