Iceland’s real gross domestic product contracted by 1.1% in the second quarter of 2026 compared with the same period last year, according to first estimates from Statistics Iceland.
A widening deficit in goods trade was the main drag on growth, even as household consumption and investment increased.
What’s the Story?
- Real GDP fell 1.1% year-on-year in Q2.
- Seasonally adjusted GDP fell 3.0% from the first quarter.
- Data-centre-related investment reached a record level.
Trade weighs on growth
Statistics Iceland estimates the combined goods-and-services trade deficit at ISK 87.8 billion in the second quarter, up from ISK 66.2 billion a year earlier. The goods deficit alone was ISK 154.4 billion, partly offset by a services surplus of ISK 66.6 billion.
Gross fixed capital formation rose 5.7% year-on-year. Business investment increased 10.1%, while residential investment fell 3.7%. Statistics Iceland says investment connected to data-centre industries reached a record level, with estimated volume growth of 10.6%.
Household consumption increased 0.8% and government consumption 1.2%. Despite the quarterly contraction, GDP in the first half of 2026 remained 1.3% above the first half of 2025.
Iceland Review has previously covered the growing role of data centres in Iceland’s energy-intensive economy.
**Source:** Statistics Iceland.
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