Arion Bank forecasts Iceland GDP growth at 1.2% in 2026, 1.6% in 2027

• Arion Bank’s 2026-2029 macro outlook flagged a slower-than-expected recovery amid global uncertainty, high rates, sticky inflation, weaker consumption.
• Forecasts 1.2% GDP growth in 2026, rising to 1.6% in 2027, both below the historical average.
• Inflation seen staying above target in the near term, easing gradually; rate cuts not expected until later in 2027.
• Households viewed as broadly resilient, yet consumption expected to remain subdued; housing market slowdown projected to persist.
• Short-term unemployment expected to rise; investment seen contracting before export-led growth improves later in the forecast period.

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