FX.co ★ Iceland Economy Returns to Growth in Q1

Iceland’s economy grew 2.7% year-on-year in the first quarter of 2026, rebounding from a 0.6% contraction in the previous quarter. Net trade made a positive contribution to GDP: exports rose 1% after a 5% decline, driven by faster growth in services (6.9% vs 4.3%), while the drop in goods exports moderated (-3.9% vs -13.3%). At the same time, imports fell more sharply, down 8% after a 4.2% decrease.

Gross capital formation also contracted, but slightly less than before (-12% vs -12.5%), and changes in inventories increased by 1.1% after stagnating in Q4 2025. In contrast, the pace of government spending slowed to 0.8% from 1.1%, and private consumption growth eased markedly to 2.2% from 5.5%. On a seasonally adjusted quarterly basis, GDP surged 3.7%, reversing a 0.8% contraction in the previous period.