FX.co ★ Iceland Economy Returns to Growth in Q3

Iceland's economy experienced a 1.2% growth year-on-year in the third quarter of 2025, rebounding from a revised 0.2% decline in the preceding quarter. The primary driver of this growth was household final consumption, which increased by 4.2%, largely due to heightened spending on service-related goods. In addition, gross fixed capital formation rose by 2.2% and government consumption increased by 0.9%, contributing positively to the economic expansion. However, net external demand negatively impacted growth by an estimated 4.5%, as the trade deficit widened with exports rising by 2.6% and imports surging by 13.5%. On a seasonally adjusted quarterly basis, GDP contracted by 0.2% in the third quarter, following a revised decline of 0.4% in the previous period.