Markets overview

A great many things have changed since Landsbankinn Economic Research published its last macroeconomic and inflation forecast in October last year. The Covid-19 pandemic, with all its restrictions on consumption and daily life, has subsided and people are again free to travel. Icelandic consumption patterns in the past few months have shown clear signs of increased overseas travel and the stream of travellers to Iceland is also increasing. In general, the outlook can be described as bright. We forecast 5.1% economic growth this year, upping our forecast somewhat from last year, and expect growth to be driven by an increase in tourist numbers, a total of 1.5 million this year. Travellers to Iceland numbered 690,000 in 2021.

Registered unemployment was 4.5% in April, compared to 4.9% in March.

The MPC raised the policy rate by 1 percentage point last week. The CBI’s key interest rate (seven-day term deposits) is now 3.75%.

The CPI rose by 1.25% month-on-month in April, bringing the inflation rate to 7.2% compared to 6.7% in March.