After the prosperity Iceland experienced post-World War I, the Great Depression of the 1930s brought severe economic hardship. The global economic downturn hit Iceland hard, as the value of its exports, particularly fish, plummeted. Between 1929 and 1932, the value of Iceland’s exports dropped from 74 million to 48 million kronur, and it did not recover to pre-Depression levels until after 1939.
The economic crisis led to increased government intervention in the economy. Imports were regulated, foreign currency trade was controlled by state-owned banks, and loan capital was distributed through state-regulated funds. Iceland’s economy suffered further setbacks with the outbreak of the Spanish Civil War in 1936, which halved the country’s crucial saltfish exports. The depression in Iceland continued until the outbreak of World War II, when demand for fish exports soared, bringing much-needed economic relief.