Reykjavik, Iceland (CNN) It was a casual hug from an old friend and yet it proved to be so traumatizing. I had arrived back in my native Iceland the day before and now armed with a negative Covid-19 test from the airport, here I was in a bustling cafe in Reykjavik.

"Hello you, long time no see!" Two friends greeted me and one gave me a warm embrace but my natural reaction was to step back from them, and I found it hard to keep up a conversation standing so close. Their natural ease, which six months ago would have felt so normal, now felt uncomfortable and stressful. I felt tongue-tied, and my manners and chutzpah seemed to have deserted me.

I mumbled something to my old friends and then went to seek sanctuary in a cup of tea. There I pulled myself together, gathered my thoughts and went back for another round of gossip. And it felt liberating to have normal conversations again.

Iceland has been praised for its handling of the crisis after an initial spike in cases in February. The government then changed tactics, started testing and tracing, closed the borders and introduced restrictions. I suppose you could argue the chances of success are far higher on an island with a population of around 360,000 people. There's been less than 2,000 cases and 10 deaths recorded.

It also helps that Icelanders showed great faith in the government and sat glued to media briefings being provided not by politicians but by chief scientists and the police, following their every advice.

I've joined most of the country in downloading an app that traces your movement. It's designed to help the authorities track and notify anyone that might have been in contact with or been affected by the virus. What follows is testing and possibly quarantine.

All of this has resulted in the people here being able to go about their lives in relative normality. I've been a regular at our popular swimming pools, attended soccer matches, dined with friends and been to parties where the conversation has been dominated more by the recent Will Ferrell Eurovision movie about Iceland than Covid-19.

The bars and restaurants in Reykjavik are full too and there's not a mask in sight. The only reminder that things are not quite normal are the hand sanitizers you find everywhere and the early closing time of 11 p.m., which is usually the time that Icelanders are just getting the party started.

The biggest economic casualty of the coronavirus has been tourism. Last year, almost 2 million tourists visited and that number has now been reduced to a trickle, but the locals have responded by indulging in staycations. Social media feeds are full of spectacular pictures from friends traveling around the island, and hotels and camping sites around the country are full to capacity.

The government is also encouraging this trend by providing every resident with a 10,000 IKR ($74) voucher to spend in restaurants, hotels and attractions.

But as the biggest travel weekend of the summer approaches everyone will be reminded that this is a year like no other. This last long weekend of the summer holidays would normally mean big festivals all over the country -- but with bans in place on gatherings of more than 500 people they are all canceled.

Big events like the Westman Island jht party are off, the first time it has been canceled since WWI. Not even the big volcanic eruption in 1974 stood in the way of that celebration. But, with typical Icelandic optimism, they are already selling tickets for 2021.

There is still a healthy amount of fear and nobody is complacent -- many are worried that people are being too relaxed and that it can only lead to another spike -- especially with the border restrictions easing and more tourists coming in. It's a sign that people here aren't taking their privileged position for granted but also their desire to maintain their way of life.

It hasn't taken me long to adapt to the freedom here, so when I bumped into my cousin who had just arrived from Miami I went in for a hug but much like my first reaction a couple of weeks earlier -- he stepped back.

He also faces stricter rules because he arrived from the US, whose citizens are still banned from entering Iceland, so he had to wait at least five days and get two negative test results before he can give anyone here a hug.

Listening to friends here I'm reminded not only of the ability of this country to cope with adversity but also of Iceland's unofficial slogan: "etta reddast" which roughly translates to "It will all be OK in the end." It's helped us through a global financial meltdown, a volcanic eruption which grounded flights around the world and hopefully it will stay true again for the coronavirus.

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Iceland is an outpost of normality amid Covid pandemic - CNN