Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system, low unemployment, and remarkably even distribution of income. The Icelandic economy is relatively small but growth and input have been sufficient to provide Icelanders with living standards that are among the highest in the world.

Iceland was severely hit by the global financial crisis in late 2008.  The national economy has been in great difficulties due to the collapse of its financail sector.  Nevertheless, the Icelandic government is still hoping to strive for an earliest recovery by 2011.