The COVID-19 pandemic has made its mark on 2021 worldwide, and in greater measure than previously hoped. Nevertheless, the Icelandic economy has turned the page and begun a new growth phase, after contracting 6.5% in 2020.
We forecast GDP growth at 4.2% in 2021, driven mainly by robust growth in domestic demand. Export growth has suffered a temporary setback, but most indicators imply that it will rebound sooner rather than later.
For 2022, we forecast 3.6% growth, with exports growing rapidly and domestic demand continuing to grow apace. In the final year of the forecast horizon, 2023, we forecast 3.0% growth, as the impact of COVID-19 will be behind us and the economy will have begun to rebalance.