Iceland’s economy expanded 2.7% year-on-year in the first quarter of 2026, rebounding from a 0.6% contraction in the previous quarter. Net trade contributed positively to GDP, with exports rising 1% after a 5% decline, as services growth accelerated (6.9% vs 4.3%) and goods exports declined at a slower pace (-3.9% vs -13.3%). Meanwhile, imports fell further by 8% following a 4.2% decline. At the same time, gross capital formation contracted less sharply (-12% vs -12.5%), while changes in inventories rose 1.1% after stagnating in Q4 2025. In contrast, government spending growth eased to 0.8% from 1.1%, while consumer spending slowed to 2.2% from 5.5%. On a seasonally adjusted quarterly basis, GDP jumped 3.7%, recovering from a 0.8% contraction in the preceding period.