The Icelandic Economy 2026

The Iceland Chamber of Commerce has published the report The Icelandic Economy. The report is published both in English and in Icelandic translation, and provides an accessible overview of the Icelandic economy and the state of economic affairs in the country. Among other things it covers developments in the main short-term economic indicators, the state of and outlook for the economy, foreign trade, inflation developments and currency exchange rates, along with other matters relating to the economy.

A short extract from each chapter of the report can be read below. The full report runs to 33 pages in PDF format and is free of charge to all members of the Iceland Chamber of Commerce and to the media. To download it, click the login option in the box below and enter your work email address. If the address belongs to the Chamber's membership register, you will receive a link that logs you in and gives you access.

Moderate growth ahead

After a historic period of growth following the post-COVID turnaround, the economy has begun to cool. Economic growth measured 1.3% in 2025; forecasts anticipate growth of 1.6% in 2026 and an average of 2% over the following two years.

Rising unemployment is another sign of a cooling economy. According to Statistics Iceland's labour force survey, seasonally adjusted unemployment was 7.6% in the first quarter of this year. Part of that increase can be traced to improvements in the measurement of unemployment among immigrants. Nevertheless, registered unemployment is rising and there are signs that companies are holding back on hiring.

Resilience in tourism, despite challenges

Tourism has recovered after the pandemic and its share of GDP reached 8.8% in 2025 — the highest level recorded — despite various challenges. Chief among these was the collapse of the airline Play, which caused a supply shock in flights to and from the country towards the end of 2025. Conflict in the Middle East has also driven up fuel prices with corresponding effects on airlines' operating costs. The solar eclipse in August gives the sector a tailwind through increased demand for travel to Iceland. Iceland is an expensive destination compared with other countries, which erodes the sector's competitiveness.

Export sectors outside the nation's traditional pillars — fisheries, tourism, and aluminium production — accounted for 24% of the economy's export revenues, with only tourism weighing more heavily. To ensure economic stability, the number of export pillars must grow and favourable operating conditions must be secured for sectors that are not dependent on natural resources. A well-educated workforce and an environment that encourages innovation support that objective.

Iceland high on international rankings, but slipping in competitiveness

Iceland ranks highly on many social measures: the country leads on gender equality, peace, and living standards, and is the second happiest country in the world after Finland.

Iceland ranks 22nd out of 70 countries on the IMD competitiveness list, seven places lower than last year. Despite this year's decline, competitiveness has increased considerably since 2010, when Iceland sat in 30th place.

This article was automatically translated from the Icelandic original.