Iceland's Public Finances Face Projected Deficit in Early 2026

Iceland's public finances are expected to show a deficit of 23.7 billion Icelandic krónur in the first quarter of 2026, according to preliminary estimates. This figure equates to 1.8% of the nation's gross domestic product during that period. In contrast, the public finances for the first quarter of 2025 were projected to be near balance, although the full-year deficit for 2025 is estimated at 120.1 billion krónur. It is important to note that the 2025 figures are still based on preliminary data and may be subject to revision when the final settlement is released in September. The preliminary data indicates that total public revenues increased by 3.8% compared to the first quarter of 2025. Tax revenues are estimated to have grown by 1.9%, while other public revenues saw a more significant increase of 11.5%. On the expenditure side, total public spending is projected to have risen by 8.3% in the first quarter of 2026. Key drivers for this increase include a 13.0% rise in estimated spending on social transfers to households, a 20.4% increase in interest expenses, and an 8.3% rise in general government consumption.