The current account deficit measured 59.5 b.kr. in Q1/2025. This represents an improvement of 30.3 b.kr. relative to the previous quarter but a deterioration of 22 b.kr. relative to Q1/2024. There was a deficit on goods trade in the amount of 85.3 b.kr and a 19.7 b.kr. surplus on services trade. (see Statistics Iceland webpage). The surplus on primary income was 18.3 b.kr., and the deficit on secondary income was 12.3 b.kr. (Table 1).
Table 1. Balance of payments
| B.kr. | 2024/1 | 2024/2 | 2024/3 | 2024/4 | 2025/1 |
|---|---|---|---|---|---|
Current account balance | -37.6 | -39.7 | 42.8 | -89.8 | -59.5 |
Balance on goods | -51.8 | -87.7 | -71.5 | -104.1 | -85.3 |
Balance on services | 15.7 | 66.6 | 134.9 | 59.3 | 19.7 |
Balance on primary income | 8.9 | -5.8 | -10.8 | -30.7 | 18.3 |
Secondary income, net | -10.4 | -12.8 | -9.7 | -14.3 | -12.3 |
Capital account | -0.6 | -1.2 | -0.3 | -1.0 | -0.8 |
Financial account | 37.3 | -44.1 | 77.1 | -121.2 | 21.0 |
Direct investment | 9.8 | -23.4 | -19.0 | -351.6 | -45.1 |
Portfolio investment | -191.1 | 105.4 | 27.5 | 181.3 | 58.5 |
Derivatives | 0.1 | 1.5 | -2.8 | -3.6 | 0.0 |
Other investments | 99.5 | -106.2 | 73.5 | 43.4 | 13.2 |
International reserves | 119.0 | -21.4 | -2.1 | 9.2 | -5.6 |
Net errors and omissions | 75.5 | -3.2 | 34.6 | -30.4 | 81.4 |
At the end of the quarter, the net international investment position was positive by 2,034 b.kr., or 43.3% of GDP, and deteriorated by 77 b.kr., or 1.6% of GDP, during the quarter. External assets totalled 6,771 b.kr. at the end of the quarter, and external liabilities were 4,737 b.kr. The position improved by 21 b.kr. during the quarter, owing to financing activities. Foreign assets increased by 126 b.kr. and foreign liabilities by 105 b.kr. Price and exchange rate movements during the quarter lowered asset values by 126 b.kr. and lowered the value of liabilities by 105 b.kr., thereby yielding a deterioration of 21 b.kr. in the net external position. The króna appreciated during the quarter by just under 1.3% in terms of the trade-weighted index. Prices in foreign securities markets fell by 2.1% between quarters, and prices in the domestic stock market fell by 6.2%.
Table 2. Quarter-on-quarter change in international investment position
| Position at end-Q4/2024 | Financial account | Exchange rate and price changes | Other changes | Position at end-Q1/2025 | |
|---|---|---|---|---|---|
b.kr. | |||||
Foreign assets, total | 6,814 | 126 | -168 | -1 | 6,771 |
Direct investment | 1,072 | -52 | 116 | -6 | 1,129 |
Portfolio investment | 4,014 | 175 | -246 | 1 | 3,944 |
Derivatives* | 17 | 0 | -11 | 11 | 17 |
Other investments | 826 | 8 | -13 | -6 | 816 |
International reserves | 885 | -6 | -14 | 0 | 865 |
Foreign liabilities, total | 4,703 | 105 | -89 | 19 | 4,737 |
Direct investment | 2,013 | -7 | -44 | 18 | 1,980 |
Portfolio investment | 1,410 | 117 | -14 | 0 | 1,512 |
Derivatives* | 11 | 0 | -10 | 7 | 8 |
Other investments | 1,268 | -5 | -21 | -6 | 1,237 |
Net international investment position (NIIP) | 2,111 | 21 | -79 | -19 | 2,034 |
% of GDP | 44.9% | 0.4% | 1.7% | -0.4% | 43.3% |
*Other changes are included under price and exchange rate changes for derivatives.
Revision of statistics
The Central Bank has revised its quarterly statistics on the balance of payments and the net IIP back to 1995. A benchmark revision is carried out every five years, most recently in 2020.
The impact of the revision on the current account balance can be seen in the chart below. The revisions in goods and services account statistics are in line with figures published by Statistics Iceland last week.
The current account balance was revised by an average of 0.2% of GDP over the period. A revaluation of services trade constitutes a large part of the revision for 2010-2014. In 2023, services trade was revised by an amount similar to that in the years beforehand, but offsetting this was a revision of reinvestment in foreign direct investment in the amount of 3% of GDP. Other revisions of primary income in direct investment are much smaller and extend back to 2022. Revenues from foreign securities were revised for the period 2012-2017 by 0.6% of GDP.
Compensation of employees, expenditure, were revised upwards by 0.1-1.2% of GDP from 2005 through 2024. This represents foreign nationals’ employment income from domestic employers, and the effects show as a reduction in the balance on primary income. The revisions are based on data originating in the Iceland Revenue and Customs pay-as-you-earn (PAYE) register, which give a much more accurate view than before of foreign employees’ income. New income data for locally hired employees of Iceland’s embassies abroad were used as well.
Compensation of employees, revenue, was also revised to account for income earned by locally hired employees of foreign embassies in Iceland, but the effects are very limited, or less than 0.1% of GDP.
Secondary income was revised for the same period, mainly due to an increase in estimated tax revenues and pension contributions from foreign employees.
The external position of the economy has been revised back to 1995. For the period 2014-2024, the revision ranges from 0.4% to 3.2% of GDP, and for 2008 it equals 1.4% of GDP. For other years, the revision is less than 0.2% of GDP.
The revision for 2022-2024 stems primarily from direct investment and portfolio investment. There was a sizeable increase due to the revaluation of foreign personal pension savings in 2013-2024, totalling 0.4-1.7% of GDP. In addition, the external position has changed by 1% of GDP, owing to the revaluation of deposit institutions’ deposits with foreign banks.