Fish and fish products are the country's only major export commodities, while the bulk of domestic demand is met by imports of consumer and capital goods. Imports therefore far outweigh exports in value terms, and the country runs a wide deficit on the merchandise trade account. Goods exports rose by 6.3% in US-dollar terms in 2019 (latest data from the MMA) and imports declined by 2.4%. We expect the goods trade deficit to be narrower in 2020 than in 2019 as imports decline at a faster rate than exports.

Tourism accounts for almost 90% of the total value of services exports. Tourist arrivals grew at the strong pace of 14.7% in 2019. Although the services trade account has consistently recorded a surplus and is expected to continue to do so in the forecast period, this will be insufficient to offset the merchandise trade deficit. With the primary and secondary income accounts remaining in deficit, we forecast that the current account will remain in the red in 2020-21. On account of a significant slowdown in tourism activity in 2020 amid the coronavirus pandemic, the services surplus will shrink this year. Consequently, we expect the current-account deficit to expand to the equivalent of 23.6% of GDP in 2020, from an estimated 18.8% of GDP in 2019. As external demand starts to regain strength in 2021, earnings from services exports will increase, which will result in a narrowing of the current-account deficit to 15.3% of GDP in that year.