Iceland Mag

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Iceland Mag

Economy

Icelandic economy continues to boom: GDP projected to grow by 4.9% this year

By Staff

  • Construction cranes One sign of a booming economy is a rapid increase in the number of construction cranes. Photo/Pjetur

The rapid recovery of the Icelandic economy from the 2008 financial crash will continue until at least 2023, the latest economic forecast from Statistics Iceland shows. The dramatic 7.4% growth of last year is expected to slow down to 4.9% this year, 3.1% in 2018 before stabilizing around 2.6% on average during the years 2019-2023.

Growth will continue until 2023
The growth began in earnest in 2013, after a deep recession followed by uneven recovery in the years following the 2008 financial meltdown. The boom in tourism has played a key role in jump starting the economy. 

Statistics Iceland expects private consumption to increase by 7.8% this year, and 5.3% in 2018, 3.6% in 2019 and between 2.6–3.1% annually during 2020–2023. Investment is also expected to be a major engine of growth this year, increasing by 8.8% in 2017. Investment is then expected to grow at a rate closer to GDP in 2018-23. Public consumption is expected to increase slower than economic growth throughout the period, increasing by only 2.2% in 2017, 1.3% yearly 2018–2019 but around 1.8% per year during 2020–2023.

Read more: Tourism generated 8.4-10% of Icelandic GDP in 2016

The major driver of Iceland’s current economic boom is tourism. As a result private consumption, disposable income, employment and real exchange rate have recovered to more or less the levels of the pre-financial crisis boom times and investment has grown to its historically average level. Contrary to previous economic booms there is a large current account surplus rather than a large deficit.

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