There has been a sizeable deficit on goods trade in 2025 through September. According to newly published preliminary figures from Statistics Iceland (SI), the September deficit on goods measured ISK 45.5bn, more than twice the deficit for the same month in 2024. Goods exports totalled just over ISK 77bn during the month, while imports were nearly ISK 123bn.
External trade: brighter times ahead
Iceland has run a hefty deficit on goods trade in the recent term, not least because of large-scale imports relating to data centre development. Export growth has been muted, but the outlook is for exports to increase in scale and scope. Iceland’s current account looks set to improve in the period ahead.
As the chart shows, goods exports and imports have diverged in recent quarters. Last winter, for instance, imports far outpaced exports, and import growth has continued throughout this year, while on the exports side, growth has given way to a contraction.
Fortunately, though, underlying developments in the balance on goods are more favourable than these figures suggest. Import growth has been strongly affected by massive imports of investment inputs for the data centre sector. In the twelve months through September, for example, imports of investment goods excluding transport equipment grew 48% year-on-year in ISK terms, while total imports grew by 12%, as imports of other goods were generally less buoyant. The aforementioned data centres are financed by their foreign owners and therefore do not generate foreign currency outflows.
In the past twelve months. total goods exports have grown by 2% YoY in ISK terms. This sluggish pace extends to all key subcategories. For example, marine product export values rose 3%, as compared with 1% for manufactured goods and 4% for aquaculture products. In the case of marine products, export volumes have shrunk, but prices have developed favourably. The reverse is true for the aluminium industry: volumes have been increasing a bit, while prices sagged temporarily before picking up again.
Exports set to grow and broaden
In our newly published macroeconomic forecast, Economic equinox, we read the tea leaves regarding external trade in the period ahead. The analysis there states that after the financial crisis, the tourism industry’s share in Iceland’s foreign currency generation soared from 19% in 2010 to 35% by 2019. The sector generated nearly a third of total export revenues in 2024 and is expected more or less to retain that share throughout the forecast horizon.
Other sources of growth will probably take the lead in the future. One is aquaculture, which is expanding rapidly at present, particularly land-based salmon farming. In 2024, the sector generated ISK 54bn in export revenues, or 5.6% of total goods exports. That share is expected to rise markedly over the forecast period. Domestic value added will also account for a far larger share of growth, as land-based aquaculture companies – the drivers of growth in the sector – are domestically owned for the most part, while sea-based aquaculture companies are largely foreign-owned.
Furthermore, exports of intellectual property products – i.e., goods and services based mostly on the harnessing of human intelligence and research and development – have been growing apace in the recent past. Exports from these sectors generated a total of ISK 261bn in 2024, more than 13% of total export revenues for the year, as compared with 7% in 2010.
The intellectual property sector includes a cornucopia of companies ranging from medical equipment manufacturers to creators of television content and computer games. Among the drivers of growth in the sector is the pharmaceuticals industry, where activity is expected to surge. The large-scale development of data centres currently underway will also generate substantially increased revenues for the intellectual property sector in the coming term.
Turnaround in external trade in the offing
Goods and services exports shrank by just over 2% in 2024, after a three-year growth spurt. The capelin catch failure, electricity rationing to aluminium smelters, and a weak Q2 for tourism were the main reasons for the contraction. Actually, goods exports increased marginally during the year, but a fairly sharp contraction in services exports weighed more heavily.
Services exports will be the main catalyst of year-2025 export growth, which we project at just over 2%. This, in turn, will be fuelled by modest growth in tourism and stronger services revenues in the intellectual property sector. On the goods side, increased exports of aquaculture products and manufactured goods will slightly outweigh the contraction in marine product exports.
Export growth will then gather pace in the two years to follow. We project it at 3% in 2026 and just over 3% in 2027. One of the main reasons for more rapid growth in the latter two years is our expectation of moderate growth in tourism alongside faster growth in intellectual property and aquaculture exports.
Our stance on year-2025 imports has changed somewhat since our last forecast. We now expect just over 6% growth in total import volumes this year, not least because of the data centre-related surge in investment goods imports in H1. By the same token, investment goods imports will probably shrink noticeably in 2026, largely explaining that year’s slowdown in import growth. In the final year of the forecast horizon, import growth will accelerate once again.
The contribution of net trade to GDP growth will therefore be quite negative this year but significantly positive next year, and more or less neutral in 2027.
