Gross Domestic Product (GDP) is estimated to have amounted to 845 billion ISK at current prices in the third quarter of 2021, an increase of 6% in volume compared with the same quarter of 2020. During the first nine months of 2021, GDP is estimated to have increased by 4.1% compared with the first nine months of 2020.

Gross domestic final expenditure, the aggregate of household and government final consumption expenditure and gross fixed capital formation, is estimated to have increased by 5.5% in volume in the third quarter of 2021 compared with the same period in 2020. Household final consumption expenditure (HFCE) is estimated to have increased by 6.1%, increase in government final consumption expenditure (GFCE) is estimated at 0.7% while increase in gross fixed capital formation (GFCF) is estimated at 15.7%.

Significant growth was measured in both imports and exports during the third quarter of 2021 compared with the same period last year. During the period, imports of goods and services increased by 29.2% and exports by 31.2%. The surplus in the balance of trade in goods and services amounted to 12.9 billion ISK during the period. The results of external trade show a significant effect of both increased number of tourist arrivals in Iceland as well as an increase in Icelanders’ travel abroad.

Seasonally adjusted GDP decreased by 2.3% in volume in the third quarter of 2021 compared with the previous quarter.

Impact of the Covid-19 pandemic
Even though the fall in GDP in 2020 has in a way reversed in 2021, GDP in the third quarter of this year is still 3.7% lower in real terms than in the same period in 2019. When population growth is considered, GDP is 6.8% lower in real terms (GDP per capita) than in the third quarter of 2019, prior to the Covid-19 pandemic.

Household final consumption expenditure increased by 6.1%
During the third quarter of 2021, household final consumption expenditure increased by 6.1% compared with the same period in 2020. In the first nine months of the year, HFCE has increased by 5.4% in volume. The increase in HFCE in the third quarter is largely driven by an increase in direct purchases abroad by resident households compared with last years’ corresponding quarter when stricter travel restrictions were in place in Iceland and elsewhere. A considerable increase was also measured in purchases of vehicles in the third quarter compared with last year’s corresponding quarter.

Moderate growth in government final consumption in the third quarter
Government final consumption expenditure is estimated to have increased by 0.7% in volume in the third quarter of 2021 compared with the same period last year when a 4.3% increase in GFCE was measured compared with the third quarter of 2019 and 4.5% in the year 2020 compared with 2019. Gross fixed capital formation increased by 15.7%

Overall, gross fixed capital formation increased by 15.7% in volume in the third quarter of 2021 compared with the same period last year. A growth in investment was measured in most industries during the quarter and overall business sector investment is estimated to have increased by 32.7% in the third quarter of 2021 compared with the same period in 2020. In the first nine months of 2021, business sector investment is estimated to have increase by 24.4% in volume compared with the first nine months of 2020.

It is estimated that general government investment increased by 8.5% in the quarter compared with the third quarter of 2020, somewhat less than projected. According to the available information, the local government investment has been considerably lower than expected, while deviations from planned central government investment are smaller. It should be noted that the information on central government investment is generally more accurate than information on local government investment, which has historically been subject to greater uncertainty. During the first nine months of 2021, government investment is estimated to have increased by 9.9% in volume compared with the same period in 2020.

Residential investment (GFCF in dwellings) decreased by 9.8% in the third quarter, reflecting both a decline in the number of residential real estate under construction as well as the number of completed constructions of residential real estate. According to data from Registers Iceland, however, the number of building permits issued (construction stage 1) increased significantly in the third quarter, but building permits are generally considered a good indication of the expected trend in residential investment. Compared with the same period in 2020, the number of residential real estate registered at the first construction stage increased by more than 80%. During the first nine months of the year, residential investment is estimated to have decreased by 7.5% in real terms compared with the first nine months in 2020.

Despite a decrease in residential investment on a quarterly basis, residential investment is measured, in volume, above the historical average of the last 25 years. Since 1995, residential investment has on average amounted to 4.1% of GDP on a quarterly basis but is estimated at 5.2% of GDP in the third quarter of 2021. The highest share in GDP was during the last quarter of 2007, or 7.2%, but lowest in the first quarter of 2010, at close to 2%.

Surplus in the balance of trade in goods and services
The total surplus in the balance of trade in goods and services was 12.9 billion ISK in the third quarter of 2021 compared with a deficit of 12.2 billion ISK in the third quarter of 2020, at current exchange rates. Due to a greater increase in exports than imports in the third quarter of 2021, the contribution of external trade to GDP growth is positive. This is the first time since the fourth quarter of 2019 that the contribution of external trade to GDP growth has been positive on a quarterly basis.

In the balance of trade in goods, a deficit of 47.4 billion ISK was measured in the third quarter of 2021, with total exports and imports of goods measured as 192.1 billion ISK and 239.5 billion ISK, respectively.

In the balance of trade in services, a surplus of 60.3 billion ISK was measured in the third quarter of 2021, with total exports and imports of services measured as 164.1 billion ISK and 103.8 billion ISK, respectively. Increase in stock of inventories

In the third quarter of 2021, the total value of inventories increased by 9.7 billion ISK, at current prices, compared with the value in the second quarter. The largest increase was in the stock of marine products, but stocks of aluminium also increased during the period, while a decline was measured in the stock of ferrosilicon and other supplies.

Increase in the number of employed persons by 4.3% and in hours worked by 3%
It is estimated that the total number of hours worked increased by 3% in the third quarter of 2021, compared with the same period in 2020, while the number of employed persons increased by 4.3% during the same period. Despite the increase in the number of employed persons, it is estimated that hours worked in the third quarter of 2021 were 3% less than the hours worked in the third quarter of 2019, prior to the pandemic. The estimated number of employed persons was 1.1% less in the third quarter of 2021 compared with the same period in 2019.

GDP increased by 4.1% in the first nine months of 2021
GDP in the first nine months of 2021 is estimated to have increased by 4.1% in volume compared with the first nine months of 2020. In the same period, gross domestic final expenditure has increased by 5.7% where HFCE increased by 5.4% in volume, GFCE increased by 2% and GFCF increased by 13.3%. Exports increased by 11.2% and imports by 15.2% in the first nine months of 2021 compared with the same period of 2020.

Statistics
Gross domestic product
Gross fixed capital formation
Employment and Labour Productivity

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