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29.08.202509:26:50UTC+00Iceland Economy Shrinks 1.9% in Q2

Iceland's economy experienced a year-on-year contraction of 1.9% in the second quarter of 2025, following a revised 2.7% growth in the prior quarter. This represented the most significant decline since the final quarter of 2020. The downturn was largely driven by reductions in fixed investments, which fell by 8.3% compared to an 18.4% increase in the first quarter, and a decrease in government expenditure, which dropped to 0.3% from 2.3%. In contrast, household consumption saw an uptick, rising to 3.1% from 2.8%. The impact of net external demand further hindered GDP growth, with exports decreasing by 0.2% from a prior increase of 4.6%, while imports slightly eased to 13.4% from 13.7% in the previous quarter. On a seasonally adjusted basis, GDP contracted by 0.7% in the second quarter, reversing a revised 2.9% growth in the preceding period.

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