According to the results of national accounts, the estimated nominal value of gross domestic product (GDP) amounted to 1,080.3 billion ISK in the third quarter of 2023 and its growth (economic growth) 1.1% compared with the same period last year. In the first nine months of the year, GDP in volume is about 4.2% higher compared with the same period last year.

It is estimated that the gross domestic final expenditure in the third quarter decreased by 1.2% compared with the same quarter last year. Of the sub-items, HFCE decreased in real terms by 1.7% in volume and gross fixed capital formation (GFCF) by 4.3%. However, it is estimated that government final consumption expenditure (GFCE) increased by 2.3% compared with the third quarter of 2022.

In the third quarter it is estimated that the contribution of foreign trade to economic growth was positive by 2.2% and that the balance of goods and services surplus amounted to 5.2% of GDP compared with 4.8% in the same quarter last year.

The results of national accounts indicate that seasonally adjusted GDP in the third quarter contracted by 3.8% between the second and third quarter of this year.

GDP at constant prices higher than before the pandemic
When the pandemic hit in 2020 and preventative measures were in place, activity in the economy decreased. This can be seen in the development of GDP at that time. The results of national accounts indicate that GDP at constant prices has not been higher since the pandemic. In the third quarter it was 4.8% higher than at the same period in 2019.

Private consumption contracted by 1.7% in the third quarter
In the third quarter of 2023, HFCE decreased by 1.7% in real terms, marking a sharp reversal compared with the same period in 2022. For the first nine months of the current year it increased by 1.3% in volume from the previous year. Expenditure by Icelanders abroad shows a continued decline, and other domestic consumption has also slowed down. A considerable decline is measured in vehicle purchases by households or 5.2%, but it is an item that weighs heavily in HFCE.

Contribution of foreign trade to economic growth positive and surplus increasing
The growth of exports in the third quarter of this year is estimated at 0.5% compared with the same time last year, but as in the previous quarters, the growth can mainly be attributed to exported services which increased by 7.4% in volume from the previous year. From the previous quarter, the growth of seasonally adjusted exports in the third quarter is calculated to have been 3.1%. It is believed that the year-on-year growth in imports was around 3.0% in the third quarter of this year, but as in the previous quarters, there is a strong growth in imported services. From the second quarter of this year, there is a 2.5% increase in volume in seasonally adjusted imports.

The national accounts estimate indicates that net exports’ contribution to economic growth was positive in the third quarter, or close to 2.2%, and therefore there was a continuation from the second quarter of the current year. The surplus of the balance of goods and services is estimated at 56.1 billion ISK in the third quarter which amounts to about 5.2% of GDP compared with 4.8% at the same time last year. In the third quarter of this year, a deficit of 94.1 billion ISK was measured in the balance of trade in goods but a 150.3 billion ISK surplus in the balance of trade in services.

Government final consumption increased by 2.3% in the third quarter
It is estimated that the growth of GFCE was about 2.3% in the third quarter of 2023 compared with the same period last year, but the growth can largely be attributed to the public sector's purchase of goods and services. In the first nine months of this year, the growth of GFCE is measured at 1.7% compared with the same period in 2022. Public finances are discussed in more detail in the results which will be published by Statistics Iceland on December 7.

Gross fixed capital formation decreased by 4.3%
In the third quarter of this year, GFCF as a whole decreased by 4.3% compared with the same period of the previous year. At the same time the overall business sector increased by 3.1% in volume from the previous year.

The highest growth is measured in financial and insurance activities, which can be attributed to the basic impact from the same period two years ago when real estate was transferred to the public sector. In the first nine months of the year, it is estimated that the business sector investments have increased by 4.7% in volume compared with the same period last year.

It is estimated that the capital formation of the general government has decreased by 23.2% in volume in part due to the underlying impact of the aforementioned transfer of real estate from businesses. In the first nine months of 2023, it is estimated that the capital formation of the general government decreased by 13.3% in volume compared with the same period in 2022.

As in the past, a decline in residential investments is calculated year-on-year. It is measured at 5.8% based on the indicators obtained for the assessment. In the first nine months of the year, the decline in residential investments is measured at 7.2% compared with the same period of the previous year. Despite the ongoing contraction for almost three years, the percentage of residential investments in GDP is about 4.5%, which is close to average since 1995.

Stock increase in marine products
In the third quarter, the total nominal value of inventories increased by 13.6 billion ISK between consecutive quarters, which can mostly be attributed to the increase in inventory of marine products. However, inventory reduction in oil and other consumables is measured between quarters.

The number of working hours increased by 3.8%
It is estimated that the total number of hours worked increased by 3.8% in the third quarter of 2023 compared with the same period in 2022. During the same period the number of employed persons increased by 4.2%.

GDP growth in the first nine months of the year
It is estimated that GDP in the first nine months of 2023 increased by 4.2% in volume compared with the first nine months of 2022. At the same time, gross domestic final expenditure increased by 1.7%, of which HFCE grew by 1.3%, GFCE by 1.7% and GFCF decreased by 1.3%. Exports increased by 5.7% in volume, while imports were unchanged.

Statistics