After a period of continuous growth between the second half of the 1990s and 2007, Iceland was badly hit by the global international crisis since October 2008. The rapid expansion of the Icelandic financial system was done in an incautious and immoderate fashion and it has left Iceland completely vulnerable to affront the international financial shocks, up to the point of practically inducing the country into a situation of "national bankruptcy".  In top of this, during the last recent years, Iceland's economy has been stimulated by a real estate boom, which now, has contributed to destabilize the economic situation even more due to the current difficulties in obtaining mortgages.

Confronted to the total collapse of its financial system, the former government of Geeir Haarde had to nationalize the country's main banks; however this action did not contain the "hemorrhage".  Inflation continues to climb, reaching almost 18.6% today.  In November 2008, the IMF granted a loan of USD 2 billion in order to stabilize the Icelandic krona's exchange rate, which has suffered considerably due to the crisis, and to re-establish confidence in the economy.
In order to benefit from European aid and from the protection that the Euro currency provides, Iceland requested in July 2009  a candidature for its accession to the European Union.  However, this project of becoming a member of the EU has not obtained the support of the population and the issue will have to pass through a popular referendum.  The economic perspectives for 2011 remain very cautious since the country also has to settle its disagreement with the United Kingdom and the Netherlands regarding the bankruptcy of the Icelandic bank IceSave. The government has taken drastic adjustment measures as conformed to the plan of the IMF and its economy is not expected to revive until the second quarter of 2011.

The Icelandic economy relies partly in its renewable natural resources and its related industries: deep sea fishing, hydraulic and geothermal power and pastures.  It has been several years that its economy has also grown thanks to the services sector. As a fact, Iceland has become the rear-base of several companies specialized in computers and software. 
There are also many calling centers in the Icelandic territory.

Iceland has always been open to international trade. Almost half of the exports are fishing products. Iceland also exports aluminum and ferrosilicon (around 40% of its total exports), as well as dairy products.
Iceland's main customers are Germany, the Netherlands and the United Kingdom.

Foreign direct investment in Iceland has been growing during the last few years, even if it recorded a slowdown during the last  two quarters of 2008, which was mainly due to Iceland's over-exposure in the international markets combined  to the general bankruptcy of the country's banking system.
The FDI was mainly directed towards retail sales, biotechnology, geothermal science, information and communication technologies and health technologies. Franchising is in full-growth in Iceland, especially in the retail sector.
Iceland's main advantages to a company in terms of investment are: an English-speaking manpower, a positive economic environment and a high purchasing power. The main drawbacks of investing in Iceland are: high cost of living, a weak demography, a bankrupt financial system, and its long distance from the European continent.

Due to the deep financial crisis that Iceland has gone through, FDI has strongly decreased and the country has to settle its financial imbalance in order to regain the foreign investors' confidence in the economy of the country.