Developments in goods trade clearly reflect the chill that has settled over the Icelandic economy in recent quarters. The decline in exports is due to shocks to metals manufacturing – both aluminium and ferrosilicon – and a reduction in catch quotas for several species. More subdued activity in metals manufacturing is the reason for the contraction in imports of commodities and operational inputs. Furthermore, imports of computer equipment have nosedived in recent months, after a data centre-driven surge, and passenger car imports plunged at the turn of the year. Car imports ballooned in the final months of 2025, in anticipation of the year-end change in excise taxes, only to implode 40% year-on-year in January.

New growth sources offset downturns in traditional sectors

In our macroeconomic forecast, published at the end of January, we reviewed developments and prospects for the export sector. In that forecast, we noted that the outlook is for a scant 2% contraction in exports in 2026, stemming from weaker exports of manufactured metals and marine products. The former of these is due to a malfunction at one of Iceland’s three aluminium smelters, the closure of the ferrosilicon plant at Bakki, and a production cutback at the Grundartangi ferrosilicon plant. The latter stems primarily from a YoY contraction in the fishing quota for cod. But soon after we had published our forecast, it came to light that this year’s capelin season will be far stronger than we had estimated, and that the increase in exports of capelin products will probably offset this year’s contraction in mackerel and blue whiting exports.

In the tourism industry, we expect a downturn in 2026, after a solid 2025 featuring a sluggish start followed by a very brisk peak season. Estimated flight offerings and bookings with hotels and other service providers indicate that tourist numbers will be down YoY until the spring. For the peak season, the outlook is more favourable, however, as the tourism sector will benefit from interest among travellers wanting to see the solar eclipse. We expect visitor numbers to hold virtually unchanged YoY in June through September. For 2026 as a whole, we forecast that tourist arrivals will decline by nearly 4% relative to 2025, and for 2027-2028 we expect modest growth. If our projections materialise, the 2018 tourist record will stand unbroken during the forecast horizon.

Nevertheless, although contractions are likely in tourism, manufactured goods exports, and exports of wild-caught fish, there are several new sources of export growth. Among them is land-based aquaculture, which is currently undergoing large-scale development and is expected to generate steadily increasing export values over the forecast horizon.

Another sector that is growing apace is intellectual property, which is a blanket term covering goods and services based primarily on the harnessing of human intelligence and R&D. Export revenues from this sector probably came to about ISK 288bn in 2025, or just over 14% of Iceland’s total export revenues for the year. For comparison, the same ratio was 7% in 2020.

The intellectual property sector encompasses a fairly broad spectrum of companies engaged in activities ranging from medical equipment manufacture to creation of television content and computer games. Among future sources of growth within that sector is pharmaceuticals manufacture, which is positioned for a significant increase in activity. Furthermore, the ongoing large-scale development of data centres will generate substantially increased revenues within the sector in the near future.

Brief contraction in exports in 2026

As is noted above, the outlook this year is for exports to contract nearly 2%, owing to a downturn in goods exports, yet prospects for goods exports have improved since we issued our macroeconomic forecast in late January. Services exports, however, will remain flat between 2025 and 2026, according to our forecast, with increased exports of intellectual property and other services offsetting the downturn in tourism.

Exports will start firming up again next year, according to our projections, growing by nearly 6% in 2027 and just over 4% in 2028. The resolution of the manufacturing problems in the aluminium industry, increased fishing quotas (not least for capelin), and overall growth in intellectual property, land-based aquaculture, and tourism will all put their thumbs on the scales.

After considerable growth in 2025, imports look set to contract by nearly 2% in 2026, mainly because the massive build-up in the date centre sector is coming to an end, at least for the present. Imports of rental cars and miscellaneous equipment look set to ease as well.

In the years ahead, imports will regain momentum as economic activity accelerates. Nonetheless, the outlook is for export growth to overtake import growth, yielding a positive contribution from net trade in both 2027 and 2028.