Macroeconomic forecast 2021-2023

Healthy growth will begin in 2021 if tourist arrivals develop as expected


We project that GDP growth will measure 2.7% in 2021, owing mainly to a recovery of exports and modest growth in investment and consumption. This forecast represents a downward revision of GDP growth relative to the January forecast, mainly because the 2020 contraction turned out smaller than we had expected.

In 2022, we project growth at 4.9%, as we expect both exports and domestic demand to rebound even more strongly. In the final year of the forecast horizon, 2023, we forecast 2.9% growth, as the impact of COVID-19 will be tapering off and the economy will have somewhat rebalanced.

Access Macroeconomic Forecast

Main findings

  • GDP growth - Forecast 2.7% growth in 2021, 4.9% growth in 2022 and 2.9% in 2023

  • Foreign trade -Expect the current account surplus to measure 0.9% of GDP in 2021 and around 4% per year in 2022-2023

  • Inflation - Inflation to average 4.1% in 2021, 2.6% in 2022 and 2.4% 2023

  • Labour market - 8.8% average unemployment this year. 5.3% 2022 og 3.6% 2023

  • Interest rates - Policy rate to remain at 1.25% this year, and will be 3.25% by the end of forecast horizon

  • The ISK - Appreciation of 3.2% in 2021, 4.7% in 2022, and 1.3% 2023

Authors


Jon Bjarki Bentsson


Chief economist

Contact

Bergthora Baldursdottir


Economist

Contact