Results for the year 2024 indicate that gross domestic production (GDP) increased by 0.5% in volume with nominal level estimated at 4,616 billion ISK. In the fourth quarter, GDP increased by 2.1% in real terms, national expenditure grew by 6.1%, but this was offset by a negative contribution from external trade.
National Accounts figures for 2024
The real increase in gross fixed capital formation by 7.5% was the main driver of economic growth last year, while increased public and private consumption also contributed positively. However, the contribution of inventory changes and foreign trade to economic growth was negative. Gross domestic final expenditure (GDFE), the aggregate of household and government final consumption expenditure and gross fixed capital formation, is estimated to have increased by 2.3% in volume last year, the same rate of increase as between 2022 and 2023.
Revision of previously published statistics for the years 2021-2023
Along with the publication of the GDP for the year 2024, the previously published figures for the years 2021-2023 have been revised. Economic growth in 2023 was thus 5.6% instead of 5.0% in previously published figures. In 2022, GDP growth was unchanged at 9.0% and in 2021 it is now estimated that GDP increased by 5.0% (previously 5.3%) in real terms.
Economic growth increased in the fourth quarter of 2024
In the fourth quarter, economic growth increased, with GDP rising by 2.1%. National expenditure increased but the contribution of foreign trade offset the increase. Seasonally adjusted economic growth contracted by 1.4% from the fourth quarter of 2024.
Private consumption increased by 0.8%
Private consumption increased by 0.8% in the fourth quarter at real value compared with the same period last year. For the whole year, the growth is 0.6% compared with 0.5% growth the previous year. Thus, this is the second year in a row that private consumption shows modest growth. The items that decreased the most in the fourth quarter were household purchases of durable consumer goods, such as cars, which show a significant decline in all quarters of the year. There was also a decrease in the consumption of alcohol and tobacco. Private consumption expenditures due to travel abroad show an increase in the fourth quarter.
Government consumption expenditure increased by 2.1% in the fourth quarter
Estimated government consumption expenditure increased by 2.1% in real terms in the fourth quarter of 2024. The increase in government consumption in 2024 was 2.5%, compared with 1.8% growth in 2023. Public finance statistics will be published in more details by Statistics Iceland on 20 March 2025.
Gross Fixed Capital formation increases
Gross fixed capital formation is estimated to have increased by 15.6% in volume in the fourth quarter of 2024, compared with a 1.9% decline in the same period the previous year. The increase was primarily driven by gross fixed capital formation in business sectors and residential construction, while a slight decrease is observed in public sector investment (though it should be noted that there is considerable uncertainty regarding public sector capital formation due to data uncertainty). The largest increase is in capital formation in information technology and fisheries, as two trawlers arrived in the country during the quarter.
For the year 2024, gross fixed capital formation is now estimated to have increased in real terms by 7.5%, with the largest growth in residential construction for the year 2024 turned out to be significantly higher than initially expected, leading to upward revision of figures for all quarters of the year. Residential construction investment is estimated to have increased by a total of 18% in real terms over the year.
Gross fixed capital formation for 2023 has also been revised upwards from the previous estimate. The largest increase compared with the previous estimate is in fishing and aquaculture industries, as well as in research and development expenditures. Additionally, figures for capital formation in energy production, intellectual property and computer software have been revised upwards. However, figures for capital formation in the information technology sector have been revised downwards.
Total value of inventories increased in 2024
According to reports, the total value of inventories increased by 7.1 billion ISK at current prices in 2024. The increase can be mostly attributed to increase in aluminium and ferrosilicon stock while the stock of marine products decreased somewhat.
The total value of inventories increased by 10.3 billion ISK in the fourth quarter of 2024 compared with the previous quarter. This increase is more than what is usually measured in the same quarter in previous years and can be attributed to an increase in aluminium and marine product stocks.
Foreign Trade
For the year 2024, the balance of goods and services dragged down economic growth, as previously reported, and this applies to all quarters of the year. Exports in the fourth quarter increased by 1.4% in real terms after a decline in the first three quarters. In the fourth quarter, there was also significant growth in imports, about 10.5% in real terms. Of this, imports of goods increased by 14.3%, while imported services increased by 3.3% in real terms. For the year as a whole, the balance of goods and services was negative by 52.8 billion ISK compared to a positive contribution of 6.7 billion ISK for the year 2023.
Seasonally adjusted GDP fell by 1.4%
Seasonally adjusted gross domestic product (GDP) contracted in real terms by 1.4% in the fourth quarter of 2024 compared with the third quarter. During this period, seasonally adjusted private final consumption expenditure contracted by 0.3% while government consumption increased by 0.3% and gross fixed-capital formation by 9.7%. During this period, seasonally adjusted exports increased by 3.2% and imports by 12.5% in real terms.
Revision of previously published results
The general rule for the revision of national accounts is that when annual figures are published, in February and August, the results of three years are open in addition to the current year.
Planned revision of time series and changes to the reference year for constant prices
At the end of May 2025, a comprehensive revision of the national accounts time series in Iceland is scheduled for publication. This revision aligns with the harmonised European revision policy for national accounts and other economic statistics.
Alongside the comprehensive time series revision, the reference year for constant prices will be updated, and figures will be published in constant 2020 prices instead of 2015 prices, which have been in use since 2020.
Various other changes can also be expected at this time. Among them is a reassessment of the contribution of financial corporations to GDP, as new data on the activites of financial corporations are currently being processed.
A new production approach
The results of the new production settlement of the national accounts are now published publicly for the first time on the National Statistics Office's website. The development of the new approach, which began in 2021, is not finished, as this is a large-scale project that covers all production activities in the economy, whether that activity takes place under market conditions or not.
National accounts in Iceland have from the beginning been based on the so-called user approach, where the focus is on assessing the extent of economic activity based on the appropriation of economic resources, mainly consumption and investment. The production approach, on the other hand, focuses on evaluating the creation of value in the economy based on how much production takes place at any given time. In most of our neighbouring countries, the production approach is the main method of national accounts, and the goal with the new production approach is to align national accounts in Iceland accordingly.
In the first phase of the new production approach, which has now been completed, all processes have been modernised in terms of database processing and programming. A procedure has also been implemented to carry out calculations as close to the basic statistical unit as possible. Thus, in most cases, the calculations of the new production approach are based on enterprise/company identification numbers if basic statistical information supports such processing. In this way, diverse possibilities for detailed analysis and special processing are created.
In order to ensure that the new production approach provides credible results, whether it is at the annual price level or at a fixed price level, the older method was also used for comparison and, as expected, comparable results were obtained. With updated processes we plan on updating the tables earlier than previously as well as modifying our published tables by merging the current year price tables into one and further adding tables for previous year’s prices and constant prices.
The next steps in the development of the approach are, on the one hand, to improve timeliness and implement quarterly results, but also to take the first steps in developing supply and use balancing. Such an overview will call for increased data collection from key companies in the economy so that it will be possible to analyze production and supply chains in the economy and thereby coordinate the value creation that takes place each time with the allocation and final use of economic resources.