The economy of Iceland suffered greatly due to the 2008 financial crisis. The financial sector of Iceland, once an industry pillar accounting for 8% of the total GDP, literally vanished and plunged the country into its biggest recession since 1900. Straddled with huge foreign debt with little access to foreign credit, Iceland’s future looked bleak in the immediate aftermath of the 2008 meltdown. Nevertheless, the people and policy makers of Iceland were set on a quick recovery. We provide an overview of the political, economic, and cultural environments of Iceland and track Iceland’s progression from traditional factors of production (i.e., land, labor, and capital) to a knowledge and innovation based economy. Our analysis of Iceland includes a review of financial markets and how the country has responded to pull itself out of the recession. The Global Competiveness Index ranks Iceland at the highest tier (i.e., Stage 3) along with measures such as business sophistication and innovation.
This study is an amalgamation and synthesis of the methodology and outline followed by past researchers including Warner-Søderholm, Bertsch, Saeed, Abdullah (2014); Saeed, M., Bertsch, A., Ondracek, J., Bates, S., Abdullah, ABM (2014); Bertsch, A., Saeed, M., Ondracek, J., Abdullah, ABM (2013); Ondracek, J. , Bertsch, A., Saeed, M., Taft, C. (2012); Bertsch, A., Ondracek, J., Saeed, M., and Abdullah, ABM (2012); Bertsch, A., Ondracek, J., Saeed, M., and Abdullah, ABM (2012). This methodology and outline highlights salient issues for doing business in a specific country. Following an outline allows readers to compare and contrast the economic and business environments of various countries.