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Exceptional Economic Growth in Iceland

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Exceptional Economic Growth in Iceland

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Photo: Geir Ólafsson.

Preliminary figures show that gross domestic product in Iceland grew by 7.2 percent in real terms last year and is ten percent higher than it was in 2008, according to Statistics Iceland. Private consumption increased by 6.9 percent, public consumption by 1.5 percent, and investment by 22.7 percent.

Annual increase in private consumption has not been greater since 2005, and with the exception of 2007, private consumption has never been greater.

Economics Professor Gylfi Zoega, at the University of Iceland, told RÚV there are hardly any examples in history of as favorable economic figures as these in developed countries.

He said the main explanation is probably increased tourism, which leads to a stronger Icelandic króna, more purchasing power and increased current account surplus. In addition, Iceland is experiencing next to no unemployment and a low rate of inflation.

“So, this is good news,” Gylfi stated. “This is not based on borrowed money from abroad, but one industry is growing and thriving and driving up the standard of living here.”

Export increased last year by 11.1 percent in real terms, while import increased by 14.7 percent. Service exports amounted to 26.8 percent of GDP and exceeded the export of goods for the first time on record, according to Statistics Iceland.

Economic growth in Iceland for 2016 was considerably higher than predicted. In November of last year, Iceland Statistics predicted a 4.68 percent growth for 2016, while it turned out to be 7.2 percent.

GDP growth in Iceland was 1.2 percent in 2012, 4.4 percent in 2013, and 4.1 percent in 2015, so the increase to 7.2 percent last year is substantial. By comparison the 2015 GDP growth in the US was 2.6 percent, in EU countries 2.2 percent, and in Denmark 1 percent.

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