After contracting by 7.1% in 2020, the Icelandic economy regained its footing in 2021 and is positioned for strong GDP growth in the next three years.
For 2022, the forecast is for 5.0% GDP growth but considerably slower growth after that. The growth will largely be fueled by export with rising tourist numbers as well as bountiful capelin season, increased fish farming and export of intellectual property among key drivers of growth.
Inflation will remain quite considerable, mainly due to rising housing prices, international inflation and local wages. This will result in tighter monetary policy with the policy rate predicted to be at 5-6% by the year-end but decreasing in the latter half of the forecast time.