It is also useful to examine exchange rate-adjusted YoY changes in imports and exports. In terms of three-month moving averages, goods exports have been picking up recently, while imports appear to be holding broadly steady. On the imports side, there has been a marked contraction in imports of various types of transport equipment, as well as in imports of fuels. On the other hand, imports of many other types of goods have been growing YoY.
Current account deficit in 2024 despite the Q3 surplus
The outlook is for a surplus on the current account in Q3, in keeping with the overarching pattern of the past 15 years or so. The deficit on goods trade measured ISK 96bn for the period, in terms of SI’s FOB/CIF definition, whereas on a balance of payments basis, the deficit was probably somewhat smaller, as is usually the case in SI’s accounts. It can be assumed that there was a deficit on secondary income, as has often happened in the past. The secondary income deficit has averaged just under ISK 12bn per quarter in the recent term.
Offsetting this is a surplus on services trade, owing mainly to the peak tourist season. The services account surplus hit a new high of ISK 155bn in Q3/2023. This year’s Q3 surplus will probably be somewhat smaller, although we would not be surprised if it exceeded ISK 100bn. There is greater uncertainty about the primary income balance, which has been quite volatile in recent years, mainly because of the operating performance of Iceland’s three aluminium smelters, which are all foreign-owned. Nonetheless, we do not expect a deficit on secondary income combined with deficits on goods trade and secondary income to overtake the services account surplus.