Please note that this press release was corrected 5 March 2019 at 15:30 pm. The correction is due to an error in gross fixed capital formation deflators in Q4 2018, and thus the effect is also reflected in the figures for 2018 as a whole. Figures in current prices are unchanged.
Statistics Iceland has made changes to quarterly national accounts releases in order to improve compliance with international requirements, as well as our service to domestic and foreign users. From now on quarterly national accounts will be published within two months from the end of the reference period, about 1-2 weeks earlier than before. Instead of the traditional Statistical series format, results will be presented in a substantial news release.
Non-seasonally adjusted figures indicate a year over year increase in Gross Domestic Product (GDP) by 4.0% for the 4th quarter of 2018, compared with 2.5% increase in the 3rd quarter of 2018. The preliminary annual national accounts for 2018 show a 4.6% increase in GDP in real terms, same increase as in 2017. In 2018 household final consumption increased by 4.8%, government final consumption by 3.3% and gross fixed capital formation by 2.1%.
| Gross Domestic Product2013-2018 | ||||||
| Million ISK, current prices | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 |
| Private final consumption | 1,034,719 | 1,093,250 | 1,146,570 | 1,235,928 | 1,317,546 | 1,422,183 |
| Government final consumption | 472,119 | 496,321 | 535,251 | 570,663 | 613,576 | 660,529 |
| Gross fixed capital formation | 306,631 | 356,531 | 444,994 | 525,894 | 578,139 | 623,094 |
| Changes in inventories | -4,953 | 2,045 | 3,489 | 2,926 | 754 | 10,726 |
| Gross domestic final expenditure | 1,808,517 | 1,948,147 | 2,130,304 | 2,335,411 | 2,510,016 | 2,716,531 |
| Exports of goods and services | 1,047,908 | 1,068,320 | 1,188,374 | 1,186,616 | 1,206,292 | 1,323,358 |
| Less: Imports of goods and services | 897,464 | 942,907 | 1,024,730 | 1,031,090 | 1,099,482 | 1,236,841 |
| Gross Domestic Product | 1,958,961 | 2,073,560 | 2,293,948 | 2,490,936 | 2,616,825 | 2,803,049 |
| Volume changes, % | ||||||
| Private final consumption | 0.9% | 3.2% | 4.5% | 7.2% | 8.1% | 4.8% |
| Government final consumption | 0.7% | 1.3% | 1.1% | 1.9% | 3.6% | 3.3% |
| Gross fixed capital formation | 2.2% | 15.9% | 21.3% | 17.8% | 11.6% | 2.1% |
| Changes in inventories | -0.5% | 0.4% | 0.0% | -0.1% | -0.1% | 0.3% |
| Gross domestic final expenditure | 0.5% | 5.3% | 6.7% | 8.0% | 7.6% | 4.1% |
| Exports of goods and services | 6.7% | 3.2% | 9.1% | 10.9% | 5.4% | 1.6% |
| Less: Imports of goods and services | 0.1% | 9.8% | 13.8% | 14.5% | 12.5% | 0.1% |
| Gross Domestic Product | 4.1% | 2.1% | 4.7% | 6.6% | 4.6% | 4.6% |
The economic growth in 2018 is mainly driven by an increase in household final consumption. Contribution of government final consumption, external trade and GFCF is somewhat less.
Slower growth in gross domestic final expenditure
Total domestic expenditure increased by 3.3% in the 4th quarter of 2018. Household final consumption increased by 3.3%, government final consumption by 2.6% and gross fixed capital formation by 2.5%. In 2018, total domestic expenditure increased by 4.1% compared with an average of 7.5% increase in 2015-2017.
Gross fixed capital formation increased by 2.1% in 2018
Gross fixed capital formation (GFCF) increased in real terms by 2.5% in the 4th quarter of 2018. The primary driver for GFCF growth in the quarter was a 4.9% increase in residential investment and an 76.5% increase in government services, while business sector investment decreased by 13.1%.
In 2018, GFCF increased by 2.1%, compared with an 11.6% growth in 2017. Business sector investment decreased in real terms by 5.4% in 2018 compared with a 7.7% growth in 2017. Although GFCF growth has slowed down compared with last year's increases, the share of GFCF was 22.2% of GDP in 2018, which is in line with the historical average of the last two decades.
General government investment increased by 21.2% in 2018, which is the same growth rate as in 2017. Strong government investment growth in the 4th quarter of 2018, as well as in the year as a whole, can partly be explained by the transfer of Hvalfjörður road tunnel from Spölur ehf to the state. The transfer of the tunnel was in accordance with the original concession contract from 1995 which stipulated that the state would acquire the asset together with the associated structures at the end of the contract period, free of charge. As from the 4th quarter of 2018 the asset is recorded on the government’s balance sheet through GFCF based on a preliminary valuation and matched by capital transfer revenue, with no impact on government net lending/borrowing. The impact on total GFCF is also non-existent as the increase in public investment is matched with a corresponding decrease in business sector investment.
Continued growth in residential investment
Residential investment increased in real terms by 16.7% in 2018, compared with 20.7% growth in 2017. The share of residential investment was 4.3% of GDP in 2018 but the average share for the period 1998-2018 was 3.9%.
Private final consumption increased by 4.8% in 2018
Private final consumption increased in real terms by 3.3% in the 4th quarter of 2018 compared with the same period 2017, which is a slightly less growth than has been observed in the quarterly accounts in recent years.
Private consumption increased by 4.8% in real terms in 2018 compared with 8.1% in 2017 and 7.2% in 2016. In real terms, private consumption last year was higher than previously measured. In per capita terms, private consumption increased by 1.9% in 2018, but is still 1.1% lower in real terms than when private consumption per capita was highest in 2007. In recent years a strong correlation has been between the development of real wages and private consumption. Since 2007, real wages have increased by 28.5% and private consumption has increased by 20.2% in real terms. Private consumption per capita, on the other hand, has not increased as much in real terms, or by 8.7% since 2007.
Growth in government final consumption reaches historical average
Government final consumption increased by 3.3% in real terms in 2018, compared with 3.6% in 2017. Growth in government final consumption was rather slow in 2013-2016 or 1.6% on average per year. Since 1980, government final consumption has increased by an average of 3.1% per year. Preliminary results for the General Government finances for 2018 will be published 15 March 2019.
Deficit of balance of trade in goods and services in 4th quarter 2018
Exports of goods and services decreased by 5.9% in the 4th quarter of 2018 compared with the same period in 2017. Export of services decreased by 11.4% while exports of goods increased by 0.3%. Import of goods and services decreased by 6% over the same period. Imports of goods decreased by 9.1% and imports of services by 0.6%. The deficit in the balance of trade in goods and services in the 4th quarter of 2018 was 3.5 billion ISK according to preliminary figures, compared with a 14 billion ISK surplus in the 4th quarter of 2017, at current prices. Balance of trade in goods and services has been positive on a quarterly basis for the last decade or since the 4th quarter of 2008.
Exports of goods and services increased by 1.6% in 2018 which is a somewhat slower growth than in recent years. Export of goods increased by 3.5% while exports of services increased by 0.1%. Imports of goods and services increased by 0.1% over the same period. Imports of goods decreased by 4% and import of services increased by 7.3%. Preliminary figures for the year 2018 show a surplus in the balance of trade in goods and services of 86.5 billion ISK compared with a 106.8 billion ISK surplus in 2017.
Changes in inventories
Inventories increased by ISK 0.4 billion ISK at current prices in 4th quarter 2018. For the year in total inventories increased by 10.7 billion ISK. Seafood products inventories increased by 4.5 billion in 2018 which is partly explained by the impact of the fishermen's strike in 2017 but inventories of seafood decreased by 1.5 billion ISK in 2017 at current prices. In 2018 inventories of oil increased by 3.6 billion ISK and aluminium by 3.3 billion, however, the inventories of ferrosilicon and other primary industrial supplies decreased by just over 700 million ISK.
GDP by industries
In parallel with the publication of national accounts on the basis of expenditure approach, figures based on production approach are also published. In the production accounts, figures for 2016 are considered final, figures for 2017 are considered preliminary and figures for 2018 are first estimates.
Seasonally adjusted quarterly volume growth
Seasonally adjusted GDP in the 4th quarter of 2018 increased by 1.7% from the previous quarter. Private final consumption increased by 0.3%, government final consumption by 0.5% and gross fixed capital formation by 4.4%. Exports decreased by 1.9% and imports by 2.6%.
Revised figures
The general rule for revision of Icelandic national accounts is that when the annual figures are published, in March and September, the results of the previous three-year period are open for revision. Other published figures are considered final but time series can be revised if necessary. In accordance with this revision policy, we now publish revised results for the years 2015-2017 parallel to the first estimates for 2018. The following graph presents a comparison of previously published and revised GDP growth figures:
