Nominal housing prices have risen by 5.2% in the past 12 months, according to a new housing price index, and the real price of residential housing is slightly higher than the same time last year.

Inflation will recede somewhat in April, from 6.8% to 6.1%, only to remain fairly stable in the coming months and stand at 5.9% in July, according to our newest inflation forecast. Despite the dent interest rate increases have made in demand, the economy is still going fairly strong and there is tension in the labour market. Inflation expectations remain well above target.

Around 14% more tourists travelled through Keflavík International Airport in February of this year than the same month of 2023. The duration of stays is shorter than before, with registered overnight stays declining by 2.7% between years in February.

Figures for 2023 indicate that international tourists had fewer overnight stays in Iceland on average as compared to 2022 yet spent more per day than previously.

The three large export sectors, tourism (ISK 600 bn), aluminium and aluminium products (ISK 320 bn) and seafood products (ISK 350 bn), were behind 70% of total export value in 2023. Other export created value in the amount of ISK 580 bn, more than either seafood products or aluminium and aluminium products.

After almost two years of very robust economic growth in the post-pandemic era, the economy slowed down considerably as 2023 progressed.

There was a continuous surplus on foreign trade in the years 2010 to 2019. This turned to a deficit in 2020 and 2021 during the pandemic. Foreign trade has been more or less balanced since.

The composition of the labour market has changed somewhat since 1991. Managers, specialists, professionally qualified staff and service and retail sector employees have grown in number while office workers, farmers and fishermen have grown fewer.

Inflation has decreased in recent months and, in addition, fewer components have increased by over 10% in the past 12 months.

Last year, wages increased by 10% on average between years. Despite much higher wages, their purchasing power, i.e. the goods and services that can be purchased for wages, only grew by 1%.

Total government expenditure on domestic research and development (R&D) was 2.7% of GDP in 2022. This is slightly higher than the EU average yet lower than in countries like Denmark, Finland, Sweden and Germany.

Just over 2.2 million tourists departed from Leifsstöð International Airport in 2023, in line with our October forecast. In that same forecast, we anticipate 2.3 million tourists in 2024. The year 2023 is the second largest tourist year from the beginning, only topped by 2018, when 2.3 million travellers visited Iceland. This past year only just exceeded 2017, which was previously the second largest tourist year.

Tension in the labour market appears to be easing as high interest rates have a slowing effect on the economy. Markedly fewer business managers respond that there is no shortage of employees, in the Central Bank’s and Gallup’s survey among 400 largest domestic enterprises. Unemployment has not risen to any extent and measured 3.4% in November.

Since the beginning of 2016, individual disposable income has risen by 54%, yet purchasing power has increased by only 12%, having regard for inflation in the same period.

You may or may not already be familiar with the Icelandic yule lads, 13 (or 9!) naughty and nice Santa Claus types who come down from the mountains one by one in the days before Christmas, to prank and present kids with small gifts.

The number of first-time buyers on the housing market is up by 40% between the second and third quarter of the year. They went from 26% to 33% of all buyers, which is similar to pandemic figures, when interest rates were at their lowest.

Economic growth was only 1.1% in the third quarter; clearly, high interest rates have slowed the economy markedly. Ever since the second quarter of 2021, following the sharp pandemic-related contraction, growth has measured over 4% every single quarter.

The number of first-time buyers on the housing market grew substantially in the third quarter of the year, to 1,123 or 33% of all buyers. In the second quarter, first-time buyers numbered 789, or 26% of all buyers.

In the most recent market expectation survey, carried out two weeks ago, a majority of respondents considered the monetary policy stance too tight rather than too loose. This is quite a change - the majority has considered the stance too loose since January 2020.

Icelanders’ online spending generally peaks in November. This is largely due to the bargains and sales prevalent in November, such as Singles’ Day, Black Friday and Cyber Monday.

In order to compare terms on short-term loans, it’s not enough to look at the interest and interest rate only - we need to take the entire cost of borrowing into account, such as borrowing charges and payment fees. Loans that allow the borrower to spread payment across a longer period frequently offer terms that equal 30-40% annual interest. And that's a lot!

Landsbankinn recently launched a new feature in its app that allows customers to transfer funds from their bank accounts with other banks. This feature always requires customer approval. Landsbankinn is the first bank in Iceland to offer its customers the opportunity to carry out actions in other banks through its app.

After overheating in the aftermath of the Covid pandemic, the Icelandic economy has slowed down and it is clear that we will see considerably less growth this year compared to last year. High interest rate levels have curtailed demand, both private consumption and investment. Following a hefty inflation spike, the outlook is for slow disinflation over the coming months. We do not expect the Central Bank of Iceland to raise the policy rate further in the near future, nor do we expect to see rate cuts until the second quarter of 2024. We expect the policy rate to have come down to 4.25% at year-end 2026.

The exhibition Hringrás (e. cyclical) is a selection of works from Landsbankinn’s art collection. The exhibition explores a cycle of influence and inspiration through various media and across generations of artists. The chosen works reflect a focus on select artistic movements, namely abstract and geometric-abstract art, figurative and representational art, graphic art including etching and drawing, and surrealism. Hringrás provides a glimpse into the diversity and breadth of Landsbankinn's collection, across medium and context. 

Inflation, policy rate, inflation expectations and exchange rate. What do these concepts mean and why are they important?

A new macroeconomic forecast from Landsbankinn Economic Research expects to see 3.2% economic growth in 2023 and is considerably more optimistic than the department’s forecast from October 2022. One of the main reasons for optimism is the more positive outlook in the travel sector.

We want to warn our customers against cybercrime activity, especially attempts perpetrated through social media and messaging apps, which have been rampant of late.

Landsbankinn Economic Research forecasts 6.5% economic growth this year, record growth since 2007, only for considerable cooling to follow. Per the forecast, the policy rate will enter a rate-cutting cycle in the latter part of 2023 while inflation remains about 4% until 2025. Purchasing power looks set to contract by 0.4% this year but to pick up to the tune of 0.5% next year - a much slower increase than in recent year.

The summer months usually see an increase in attempted internet fraud. Scammers may be hoping that people on vacation are more likely to thoughtlessly click on links or fail to read text messages or e-mails carefully before responding to them.