The Icelandic economy is set to expand at a faster pace this year, underpinned by rising domestic demand, Statistics Iceland said on Tuesday.
Gross domestic product is set to grow 1.8 percent this year following a 0.5 percent expansion in 2024, the statistical office said in its latest projections. While domestic demand is expected to boost growth, net exports is forecast make a negative contribution.
The growth forecast for this year was trimmed from 2.4 percent projected in November.GDP growth is projected to increase to 2.7 percent in 2026 due to improvements in foreign trade and stronger private consumption. Growth is expected to improve to 2.8 percent in 2027.
The statistical office projected inflation to slow to 3.5 percent this year from 5.9 percent last year. Price growth is expected to average 2.7 percent next year and to hover around the inflation target thereafter.
"Inflation is set to decrease further. Economic growth has eased, long-term wage agreements have created predictability in wage developments, and the housing market has slowed down," the statistical office said.
The next set of macroeconomic projections are scheduled for June.
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