The general government deficit amounted to 130.8 billion ISK in 2025, equivalent to 2.6% of Gross Domestic Product (GDP). For comparison, the deficit in 2024 was 187.2 billion ISK or 4,1% of GDP. Expenditure associated with responses to natural disasters had a considerable impact on spending increases in 2024.
Government revenues 43.0% of GDP
General government total revenues amounted to 2,125.0 billion ISK in 2025, equivalent to 43.0% of GDP. By comparison, the government total revenues amounted to 1,970.0 billion ISK in 2024 or 43.1% of that year's GDP. At current prices, the general government revenue increased by 154.8 billion ISK, or 7.9%, from the previous year.
The central government’s total revenues increased by 7.6% year-on-year to 1,519.6 billion ISK. During the same period, local government revenue increased by 9.1% to 676.5 billion ISK. The social security funds are financed by transfers from the central government.
Taxes on income and profits, which is the general government’s largest revenue item, generated 43.1% of total revenue in 2025. Revenue from these taxes amounted to 915.5 billion ISK, increasing by 7.3% compared with the previous year. Revenue from taxes on goods and services increased by 8.2% to 585.5 billion ISK, representing 27.6% of total general government revenue. Overall, tax revenues increased by 7.5% in 2025.
Statistics Iceland’s treatment of general government accounts is according to the European System of Accounts (ESA2010). The treatment of the sale of assets and income from associated companies and joint ventures differs from the treatment of the government’s accounts and municipalities. In Statistics Iceland's general government accounts, income from the sale of assets, share of income and changes in the value of assets are only recognised in the balance sheet. Revenues from publicly owned companies are only recognised as an income in the form of dividends up to a maximum of the previous year's profit.
Government expenditure 45.7% of GDP
General government expenditure amounted to 2,255.9 billion ISK in 2025, or 45.7% of GDP. In comparison, the government’s total expenditure was 2,157.5 billion ISK in 2024 or 47.1% of GDP. Central government expenditure increased by 3.2%, local government expenditure by 8.0%, and social security expenditure by 12.1%.
Net government expenditure, after deducting revenues from the sale of goods and services, amounted to 2,127.4 billion ISK in 2025. Majority of general government expenditure goes towards government final consumption, which accounted for 60.4% of net expenditures. Government final consumption includes wages and salaries, depreciation and use of goods and services and depreciation, net of sales of goods and services. Government final consumption amounted to 1,284.2 billion ISK in 2025, an increase of 8.2% at current prices compared with the previous year. The price increase was 7.4%, resulting in a real growth rate of 0.7%.
Social benefits accounted for 16.9% of net government expenditure in 2025 or 359.7 billion ISK, an increase of 10.2% from previous year at current prices. Subsidies, grants and other expenses represented 8.7% of net government expenditure. This category decreased by 28.3% from the previous year, largely because expenditures related to natural disasters incurred in 2024 are recorded under this heading.
General government investment increased by 11.1% at current prices compared with the previous year, reaching 206.5 billion ISK in 2025. After accounting for depreciation, net government investment amounted to 69.2 billion ISK in 2025 or 3.3% of net government expenditure.
General government interest expenditure amounted to 10.8% of net government expenditure, totaling 230.2 billion ISK in 2025. Interest expenditure increased by 8.5% year-on-year at current prices. It should be noted that the scope of the general government sector, according to European System of Accounts (ESA2010), includes housing and student loan funds owned by the central government. These funds have a substantial impact on interest income and interest expenditure of the general government.
Government gross debt 88.3% of GDP by 2025
General government's net financial worth was negative by 1,889.9 billion ISK at the end of 2025, equivalent to 38.2% of GDP. For comparison, the government’s net financial worth was negative by 34.1% of GDP in 2024.
General government financial assets amounted to 2,470.8 billion ISK at the end of 2025, corresponding to 50.0% of GDP. Total general government gross debt stood at 4,360.7 billion ISK, or 88.3% of GDP, at year-end 2025. Government debt increased by 6.1% from the previous year, somewhat more than indicated by preliminary figures. The most significant factor was a 17.4% increase from 2024 in the government’s pension insurance liabilities.
Central government gross debt amounted to 3,708.1 billion ISK at the end of 2025, equivalent to 75.0% of GDP. Local government debt totaled 658.4 billion ISK, corresponding to 13.3% of GDP.