Services account balance continues to firm up

Services exports totalled nearly ISK 263bn in Q2, an increase of 2% year-on-year, according to preliminary SI figures, while services imports were virtually unchanged between years, at ISK 196bn. This gives a surplus of ISK 66.6bn for the quarter, as compared with ISK 47.4bn for the same period in 2025. In H1/2026 as a whole, the services account surplus totalled ISK 100bn, a YoY increase of 24%.

As usual, tourism is the mainstay of services exports. Revenues from travel and passenger transport by air came to ISK 160bn in Q2, far outpacing other key components of services exports. Nevertheless, the Q2 figure is 4.5% below the H1/2025 total of nearly ISK 168bn. This aligns fairly well with data such as passenger departures via Keflavík Airport, particularly the drop in transit passengers, and turnover with foreign payment cards used in Iceland, which grew only negligibly at constant exchange rates.

ICT-related exports gaining steadily in importance

Although tourism remains at the forefront of services exports, rapid-fire growth in exports of information technology-related services draws particular attention. Export revenues from information and communications technology (ICT) services totalled ISK 68bn in H1/2026, a YoY jump of 70% in ISK terms. Looking at earlier data from SI illustrates this trend even more clearly: ICT-related exports generated ISK 101bn in 2025, up from ISK 73bn in 2024, ISK 50bn in 2019, and only ISK 24bn in 2013. In just over a decade, then, export revenues generated by the ICT sector have more than quadrupled, and in the recent past they have been especially strong. Furthermore, the sector’s share in total services exports has doubled during this period, despite the tourism boom in 2013-2018.

To a large degree, this trend reflects the development of data centres and other digital infrastructure activities in Iceland. In recent years, data centre activity has grown swiftly, in tandem with large-scale investment in the sector, stronger cross-border data transfer capabilities, and the AI-related surge in global demand for data processing. Iceland is uniquely positioned in this regard, with its access to renewable energy, favourable conditions for cooling, and good connections to markets on both sides of the Atlantic.

Growth in this type of services also underscores how much the composition of Iceland’s exports has changed in the past few years. Concurrent with the surge in tourism, new pillars of exports have emerged in the form of digital services, data processing, and other tech services. These sectors generally receive less attention than conventional exports do, but they account for an ever-increasing share of Iceland’s foreign currency generation. In this context, it is worth noting that according to an estimate from the Federation of Icelandic Industries, exports from the technology and intellectual property sectors – i.e., those that rely on intelligence and technological expertise – accounted for a very large share of value creation in 2025, at ISK 369bn. In other words, the tech sectors combined generated more export revenues than marine products and aluminium together, outpaced only by tourism. The outlook is for these sectors to account for a growing share of export revenues in the years ahead, not least because of continued growth in the activities of data centres, pharmaceuticals companies, and medical equipment manufacturers.

Goods account deficit to remain wide

The more favourable services account balance does not fully offset the goods account balance, however. According to SI’s bridge table, the deficit on goods trade totalled ISK 154bn on a balance of payments basis in Q2/2026. As a result, handsome services account surplus notwithstanding, the balance on combined goods and services trade still showed a deficit of nearly ISK 88bn, an increase of ISK 22bn relative to Q2/2025.

In many ways, this trend is reminiscent of the pattern that has been seen in the recent term: export sectors are well positioned overall, but the economy’s need for imports is substantial at present. This is due not least to booming development in the data centre sector, which, as we have discussed previously, is financed by the data centres’ foreign owners and customers and therefore has little or no impact on Iceland’s foreign currency flows.

Strong exports but a negative trade balance

To a degree, figures showing deficits can give a misleading idea of export sectors’ position. The tourism industry appears to be holding its own, high prices for aluminium and marine products have supported those sectors’ export revenues despite a downturn in export volumes, information-related services exports are gaining ground swiftly, and various knowledge-based and intellectual property sectors have grown in recent years. In spite of all this, however, the balance on combined goods and services trade has weakened because of enormous growth in imports.

This will make a significant difference in the assessment of developments in the current account balance, the ISK exchange rate, and the external position of the economy in the coming term. Q3 is typically the strongest quarter by far for services exports, especially tourism. The big question is whether this increased surplus on services will cover the gaping goods account deficit and help this year’s current account deficit to shrink after the past two years’ hefty deficits.

The months just ahead will determine whether the peak tourist season suffices to improve the current account balance in H2. All else being equal, though, the current account will show a sizeable deficit in 2026 as a whole unless the balance on goods trade improves in coming quarters.