Please note that this press release was corrected 8 September 2022. Business sector investment increased by 21.6% in the quarter, when excluding the effects of investments in ships, aircraft and heavy industries, instead of 23.4%.
Gross domestic product (GDP) is estimated to have amounted to 913.3 billion ISK in the second quarter of 2022 and to have increased by 6.1% in volume compared with the same period of the previous year. Economic growth during the period is mainly driven by increased private consumption and a large increase in the arrival of tourists to Iceland compared with the same period last year.
Due to a greater increase in exports than imports in the first quarter, external trade contributes positively to GDP growth. There was a significant decline in inventories during the period, especially marine products, with a corresponding negative effect on economic growth during the period. At constant prices, GDP is now estimated to be 0.5% higher in volume than it was in the same period in 2019, before the Covid-19 pandemic.
In the first six months of 2022, GDP is estimated to have increased by 6.8% in volume compared with the same period last year. Seasonally adjusted GDP increased by 3.9% in volume in the second quarter of 2022 compared with the first quarter of 2022.
Contributions to growth by expenditure items
In the second quarter of 2022, gross domestic final expenditure (GDFE), the aggregate of household and government final consumption expenditure and gross fixed capital formation, increased by 4.8% in volume compared with the same period in 2021. Household final consumption expenditure (HFCE) increased by 13.5%, government final consumption expenditure (GFCE) increased by 1.5% while gross fixed capital formation (GFCF) decreased by 5% in volume.
A significant increase was measured in both imports and exports in the second quarter of 2022 compared with last year‘s corresponding quarter. It is estimated that exports increased by 22.3% in volume, while imports increased by 17.6%. Due to a greater increase in exports than imports in the second quarter, external trade contributes positively to GDP growth. The deficit in the balance of trade in goods and services amounted to close to 7 billion ISK during the period.
Household final consumption expenditure increased by 13.5%
During the second quarter of 2022, household final consumption expenditure increased by 13.5% compared with the same period in 2021. Direct purchases abroad by resident households increased by 237%. In the first six months of the year, household final consumption expenditure increased by 11.4% compared with the same period in 2021.
Government final consumption increased by 1.5%
Government final consumption expenditure is estimated to have increased by 1.5% in volume in the second quarter of 2022 compared with last year’s corresponding quarter. The increase during the period can largely be attributed to an increase in purchases of goods and services. In the first six months of the year, government final consumption expenditure is estimated to have increased by 1.8% in volume compared with the same period in 2021.
Gross fixed capital formation decreased by 5%
Overall, gross fixed capital formation decreased by 5% in volume in the second quarter of 2022 compared with last year’s corresponding quarter. Business sector investment decreased by 6.1% during the period, but when excluding the effects of investments in ships, aircraft and heavy industries, business sector investment increased by 21.6% in the quarter. Imports and exports of ships and aircraft are directly reflected in investment. This size often has a significant effect on gross fixed capital formation and external trade, while the effect on GDP is usually small or non-existent as the investment effect weigh out the effect on external trade. In the first six months of the year, business sector investment grew by 12.1% in volume compared with the first six months of 2021.
Residential investment (GFCF in dwellings) decreased by 6.5% in the second quarter of 2022. In the first six months of the year, residential investment decreased by 7.2% compared with the first six months of 2021.
The increase in government investment was measured at 2.8% in the quarter compared with the same period in 2021 and in the first six months of 2022 the increase was 3.8% compared with the same period of last year.
Less deficit in the balance of trade in goods and services
The total deficit in the balance of trade in goods and services was 7 billion ISK in the second quarter of 2022, compared with a deficit of 32.2 billion ISK in the same quarter of 2021, at current exchange rates. Due to a greater increase in exports than imports, external trade contributes positively to GDP growth.
The deficit in balance of trade in goods was 40.2 billion ISK in the second quarter of 2022, with total exports and imports of goods measured as 254.6 billion ISK and 294.9 billion ISK during the period.
In the balance of trade in services, a surplus of 33.3 billion ISK was measured in the second quarter of 2022. During the period, exports and imports of services amounted to 183.7 billion ISK and 150.4 billion ISK.
In the first six months of 2022, the deficit in balance of trade in goods and services was 38.5 billion ISK, compared with a deficit of 60 billion ISK in the first six months of 2021, at current exchange rates.
Decrease in stock of inventories
In the second quarter of 2022, the total value of stock of inventories decreased by 17.9 billion ISK at current prices compared with the value in the first quarter of 2022. The largest decrease was in stock of marine products during the quarter.
Iceland‘s GDP growth is high in international comparison
According to the latest published estimates of the GDP growth in countries within the European Union and in the United States, economic growth in Iceland is considerably high. Within the eurozone, it is estimated that the seasonally adjusted GDP has increased by 3.9% in volume compared with the same period of the previous year, by 1.6% in the United States and by 7.3% in Iceland. Compared with the previous quarter, seasonally adjusted, it is estimated that GDP within the eurozone has increased by 0.6% in volume, but on the same scale, a 0.6% decrease is estimated in the United States and a 3.9% growth in Iceland. These are the first preliminary seasonally adjusted figures that the statistical offices of the respective countries have published and are presented with the usual proviso.
Hours worked increased by 8.7%
According to measures of labour inputs, which generally give a strong indication about the production of goods and services for final use, total number of hours worked increased by 8.7% for the period as compared with the second quarter of 2021. In the same period, it is estimated that the number of employed persons increased by 8.9% and jobs increased by about 10.2%. In the second quarter of 2022, the total number of hours worked is still 2.3% lower than it was in the second quarter of 2019.
Seasonally adjusted GDP increased by 3.9% between quarters
Seasonally adjusted GDP increased in volume by 3.9% in the second quarter of 2022 compared with the previous quarter, the first quarter of 2022. Seasonally adjusted, household consumption expenditure increased by 4% during the quarter compared with the previous quarter, 0.3% increase in government consumption expenditure and a 0.5% decrease in investment. During the same period, seasonally adjusted exports increased by 4.4% while imports decreased by 0.1%.