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Issue 8 2014 - Freight Business Journal


///SCANDINAVIA


Sea of tranquillity


Scandinavia has weathered the economic storms much better than most of the other major European economies. It may not be the most exciting of markets – but in turbulent times, maybe that is no bad thing.


Have the Swedes overcooked things?


Many economists blame indecision over interest


It is possible to overstate the rates


for the sluggish state of the Swedish economy. According to the Economist, the country’s central bank, the Riksbank, has once again cut interest rates, having first raised them quite sharply as the economy started to recover in 2010, and at a time when other countries had them at near zero. But the Bank for International Settlements has warned that trying to push rates up too fast too soon might ultimately mean a longer period of low interest rates. Sweden is outside the Euro, so


the Krona is one extra lever that it can deploy. At least the cut in interest rates has weakened its


currency and improved


exports again. These have struggled lately; many of the country’s major volume exports like paper and steel are price- sensitive.


scale of the problems. Sweden is widely regarded as a model of how an advanced western economy can be deregulated and the state sector rolled back, while keeping its much prized welfare system. Government debt has been reduced, but at the same time spending on some areas like healthcare and education have been increased. There is no question of austerity measures and swingeing cuts that have so unsettled Eurozone economies. Sweden isn’t a country of rust belts co-existing with more prosperous regions. Wealth and economic activity are widely spread throughout the country. It helps, of course, that there


is a high degree of social and political consensus in Sweden. Politicians don’t usually grandstand; instead, there is a quiet agreement on the


measures that need to be taken and the Government of the day gets on with it. True, Prime Minister Fredrik


Reinfeldt has just lost an election, his conservative party government replaced by a social democrat-green-communist minority government. Anywhere else, this would be a seismic political change; in Sweden it will probably prove to be business as usual. Of the three major


Scandinavian countries, only Denmark is a major agri exporting nation. Its butter and bacon have long been staples of British tables, but one worry is the ongoing trade spat between the EU and Russia that has prompted Moscow to impose a widespread ban on EU- produced foodstuffs. Denmark was a major supplier to Russia and will now have to seek new markets.


Like Sweden, welfare is high


on the Danes’ agenda and the country benefits similarly from political and economic stability and a high degree of consensus. Heavy


industry is less


important than in Sweden and the economy is more service- orientated. Apart from the food sector and energy, exports tend to be relatively specialised and invisibles play a much more important part. The recession hit slightly


harder in Denmark – the housing market in particular took a tumble. Nevertheless, government debt is not really a problem and the economy has staged something of a recovery since 2010. Earlier this year, the Danish


Government unveiled a plan to reinvigorate economic growth, which has been bumping 1.5%,


along including measures


entice manufacturers to keep production in Denmark rather than offshore it and to protect industrial jobs in the regions particularly. The UK has a special interest


in the Danish economy, being one of


its top three trading


partners along with Germany and Sweden. Norway is of course the most


energy-dependent of the three major Scandinavian economies and it has lately ridden the boom in world oil and gas prices. There are those who fret about the one-commodity economy, though Norway is perhaps more economically diverse than some would realise. Apart from the large and highly export orientated fishing industry, it is also a major centre for medical research, for example. Oil and gas wealth does


at around to


tend to skew economies, of course and Norway’s costs


are notoriously high. This can make life difficult for exporters of anything that hasn’t been sucked from below the North Sea.


The government is also


conscious of the fact that its very generous welfare spending has been largely funded by oil wealth. If the world is entering an era of relatively low energy prices, expectations may need to


be managed accordingly.


Already, economists are predicting a near halving in oil and gas’s contribution to GDP over the next year or so. But again, many countries


would envy Norway’s ‘problems’. Much of the oil revenues have been invested in a sovereign wealth fund, which has been likened to a giant national savings portfolio. This should ensure standards of living and prosperity for years if not decades to come.


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