Macroeconomic forecast 2020-2022

Strong recovery after a temporary deep shock


Highlights

  • GDP growth - 8.6% contraction in 2020, followed by 3.1% growth in 2021 and 4.7% growth in 2022

  • External trade - Goods and services exports shrink by over 27% in 2020 while imports contract by over 16%. Current account deficit 1.1% of GDP in 2020, followed by C/A surplus of 0.4% in 2021 and 1.4% in 2022

  • Inflation - 2.7% average inflation in 2020 and 2021, falling to 1.9% in 2022.

  • Unemployment- 7.8% average unemployment rate in 2020. 7.6% 2021 and 4.7% 2022.

  • Interest rates - Policy rate to remain at 1.0% until mid-2021 and then rise gradually as economy recovers. Long-term rates to stay below previous averages.

  • ISK - When the export sector recovers, some appreciation of the Króna is likely

Authors


Jón Bjarki Bentsson


chief economist

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Tryggvi Snær Guðmundsson


Economist

Contact