Many people on this North Atlantic island say the job losses and economic collapse mean they will be giving less expensive gifts and slicing some people off their Christmas lists, sending them cards instead of gifts. Fewer people plan to splurge at the traditional Christmas concerts and galas that are a staple of social life here.
Arni Georgsson, one of many people who lost jobs in the financial sector, said Iceland's gift-giving culture has changed as hard times have gripped the population.
"People are no longer trying to one-up each other in fanciness like the nouveau-riche," he said. "People knit, for example, and make presents by hand for one another. People are saving their money. People accept that they will have to do with less now than before because so many are in the same position."
Georgsson said he sees some benefits, though, as Icelanders become less materialistic.
"People now look inward and ask what is most important to me, what did I stand for before and what do I stand for now?" he said. "There is a different and altogether humane mood in Iceland today."
If there are spiritual rewards being reaped, they are the only evident silver lining of what has been a spectacular fall for Iceland, in which a sustained boom fueled rapid growth until an abrupt series of setbacks began in the autumn of 2008.
The banking system and the value of the currency collapsed, ushering in an era of uncertainty marked by noisy protests that occasionally turned confrontational.
Much of the anger focused on the country's political elite. The government of Prime Minister Geir Haarde was forced to resign earlier this year after a series of vocal demonstrations in front of the Althingi, the Icelandic parliament.
Purchasing power has dropped dramatically, job security is a thing of the past -- and so the face of Christmas has changed, at least in terms of giving pricey gifts.
The crowds at weekly protests held in front of parliament each Saturday dwindled during the summer and fall but seem to have gained size in the last few weeks, showing increasing impatience with the slow pace of reforms and recovery.
Kindergarten teacher Kristin Thora Gardarsdottir, 52, told the Icelandic National Broadcasting Service that she took part in the demonstrations last winter and believes the movement may be gathering pace again.
"If protests start in force I fear this winter could be worse than the last," Gardarsdottir said.
The uncertainty, and the lack of snow, have not prevented Christmas preparations from going forward. Christmas lights have been going up all around the country, and decorations are adding sparkle and color.
The days are extremely short, with only about six hours of weak sunlight before darkness falls around 4:00 each afternoon. Christmas lights are wrapped around lampposts in the capital and holly is displayed along Laugarvegur, Reykjavik's main shopping street, where bargains can be found.
Shoppers are bundled up in heavy coats, mittens and scarves as they go from store to store.
Though northern and eastern Iceland have seen some snow, the capital has not. The streets glisten with frost, but no precipitation is forecast: The prediction of a "red Christmas" still stands.
People are planning their Christmas dinner feasts with mouthwatering gusto, even if they are economizing at the same time.
Haukur Claessen, who works at a day care center, said he and his wife and child will have the traditional delicacies despite the crisis, which he said has not had a tremendous impact on his family because it was frugal, even during the go-go years.
"We still eat veal with sugarcoated potatoes on Christmas Eve," he said. "We still decorate the apartment and buy each other presents. The thing is we never got used to spending too much money during the holidays, or any other time of the year."