Dynamic, innovative economies to counteract Covid-19

16 Aug Dynamic, innovative economies to counteract Covid-19

As the global market recovers from the effects of the COVID-19 pandemic, Nordic countries emerge stronger due to fiscal planning and a unified front

The COVID-19 pandemic was devastating for the world economy. Across the board cuts in income, rise in unemployment and disruptions in supply chains were felt. The stock market dipped, and oil prices fell to the lowest they had been in eighteen years in April 2020. Countries sensitive to the oil price, such as Norway, suffered a record collapse in currency rates. However, Nordic nations were well prepared to handle the economic challenges presented by the crisis due to shared qualities: long and stable democracies, robust welfare systems and high-level healthcare infrastructures. Additionally, low population density meant lowered rates of infection. In Sweden, the most populated country in the Nordic region, the rate of single-person households with no children sat at 40% in 2020. While by no means without economic tension and friction during 2020 and the months following, Nordic nations remained above the global economic norm and are expected to rebound fast as vaccine roll outs keep the virus in check.

Governments were fast to put money back into the system where it was needed. In Denmark, 2.6% of frozen holiday pay was handed out to working citizens and smaller amounts to those outside the labor market. Businesses also received light capital. Norway created a stimulus package meant to bolster domestic demand, including industrial investments and tax breaks for ailing sectors. Sweden set its sights on aiding areas of the population at risk and financing small to medium-sized enterprises. Finland’s recovery strategy is focused on education and infrastructure development. Overall, recovery capital for Nordic countries is expected to be in the range of 5-10% of its gross domestic product (GDP), given if it is fully utilized or not. In comparison the European Union’s fiscal recovery packages were worth just about 11% of its GDP, the United States about 26% and Japan 56% by May 2021.

According to a poll of economists done by Reuters, Nordic economies are due for a rebound as consumers put their saved money down to enjoy their new freedoms. Sweden and Norway are expected to grow 3.5% in 2021 and 2022. Sweden’s economy is expected to climb 3.6% this year and 3.5% the next. Denmark saw its GDP grow 3% in 2021, meeting expectations. Economists are basing these predictions on strong household financial wealth, a booming housing market and an already seen rise in spending.

Nordic countries have allocated USD 335 million for COVID-19 research. A total of USD 212 million is earmarked for projects in medicine and health, USD 83 million for social science studies, USD 36 million for innovation and the rest on biological sciences and infrastructure. Sweden allocated by far the most to the studies, covering 47% of the funds. They were followed by Finland, Denmark, Norway, Iceland and Faroe Islands. Most of the medical projects are being done in Sweden and Iceland, while Norway and Finland will take on the bulk of social science research. While the countries may have differed on their response to the pandemic, the Nordic region is now cooperating to better understand the virus and the effects of the pandemic.

Although brutal, the COVID-19 pandemic has spurred a rise in global spending on specific key trends, such as sustainability, digitization and research and development. As world leaders in these areas, Nordic countries stand to gain. Additionally, the pandemic has shown how beneficial integrated investments and policies can be for the region, and more cooperation is expected as markets around the world open up and the global economy returns to normal.