Still struggling to overcome the deep crisis that set in when its major banks collapsed in late 2008, Iceland is hoping the recent surge in tourist numbers will help put it on the route to recovery.

Whale safaris, geo-thermal spas and a highly favourable exchange rate are among the factors currently attracting thousands of tourists to Iceland.

The Icelandic currency has shed over 50% of its value in 18 months. Currently €1 equates to around 172 krónur.

The small, north-Atlantic island just below the Arctic Circle abounds with natural beauty, from volcanic landscapes and geysers to the near-round-the-clock daylight in summer.

As worldwide tourism figures were dragged down by the global downturn in 2009, the Blue Lagoon geo-thermal spa, located some 40km southwest of Reykjavik, and the rest of Iceland saw its own tourist trade boom.

Visitor numbers jumped 12% last year to around 1.23m people, or about four times Iceland's population, with German, French and British visitors topping the list, and the trend is set to continue this year.

The financial crisis brought a double windfall for the island’s tourism sector, with low prices attracting foreigners while Icelanders hit by the crisis and the staggering cost of foreign currency, have increasingly decided to holiday at home.

Even Mother Nature appears to be working to help Iceland’s tourist industry.

Last month a minor volcanic eruption turned a previously deserted part of the country into a major attraction, with visitors flocking to catch a glimpse of the still gushing lava.

‘I hope the eruption continues for a while since it's very good for business,’ said Ingi Thor Jakobsson, who manages a hotel near the glacier Eyjafjallajokull, where the Fimmvorduhals volcano erupted on 21 March.

Up until a year and a half ago, Iceland was among the world’s wealthiest nations thanks to a booming finance sector, but since the banking bust, tourism has emerged as one of its only likely saviours.

Finance Minister Steingrimur Sigfusson even used a clash with Britain and the Netherlands over compensation for losses linked to one of Iceland's failed banks, to put in a good word for the tourist industry.

‘I call on our British and Dutch friends to come and join the tourism boom we're experiencing in Iceland right now,’ he said recently. ‘Help us get our money back!’

To keep prices from tumbling too far, many establishments like the Blue Lagoon have started to list them in euro.

‘Really? The prices have gone down? It doesn't seem like it!’ 48-year-old Peter Iu of Hong Kong said as he looked for his wallet in line at the Blue Lagoon cafe.

The entrance fee to the geo-thermal spa has been hiked to €23, horrifying locals who see it as part of their national heritage.

Many jumped at a recent ‘two-for-one’ coupon offer available only in Icelandic newspapers, for a chance to relax in the hot water next to wealthy foreigners.

‘Otherwise it would be off limits to us,’ said student and spa regular Sigrun Jona Norddahl.

Agence France Presse