FX.co ★ Iceland’s Economy Contracts in Q4 as GDP Slips 0.6% Year-on-Year

Iceland’s gross domestic product declined by 0.6% year-on-year in the fourth quarter of 2025, marking a clear loss of momentum after modest growth earlier in the year. The latest data, updated on 27 February 2026, show that the economy has weakened compared with the third quarter of 2025, when GDP grew 1.2% on an annual basis.

The figures are based on a year-over-year comparison, meaning the fourth-quarter result measures the change in output relative to the same quarter a year earlier. Similarly, the previous reading of 1.2% reflected the change in the third quarter versus the third quarter a year before. The shift from positive growth to contraction underscores a notable cooling in Iceland’s economic activity toward the end of 2025.