Key Markets 2010
2009 has been a year full of contrasts and challenges in the whole Nordic and Baltic region. The worldwide crisis has been felt everywhere but with very different outcomes.
The biggest Nordic Countries are already rising out of a short recession, the best performing country being Norway, helped by its oil reserves, followed by Denmark. Sweden and Finland's export industries were hit harder but are showing signs of recovery, and most exporters are going to go through the hardships as their industries had made record profits during the previous years.
The year has been bleaker in Estonia and Lithuania, still undergoing a severe downturn after years of double-digit growth. Latvia and Iceland faced a quasi-bankrupt with serious social and political consequences, but show clear signs of stabilisation after receiving IMF loans and support.
Real GDP growth (%) in the Nordic and Baltic countries,
history and forecasts
Forecasts for 2009 and 2010 based on IMF October 2009 report
One of the key issues has been exchange rates, and it is going to be so in 2010 also. Finland remains the only Eurozone member. Denmark and the 3 Baltic countries have their own currencies but they are pegged or linked to the Euro and they managed to remain so through the financial turmoil. Sweden, Norway and Iceland have an autonomous currency, all 3 saw their exchange rate versus the Euro go down quickly in the fourth quarter of 2008 and follow a trend up since March 2009 even though none of them has been back to their pre 2008 level as of November 2009 - Norwegian krone is close.
Inside the region, this has created a few unusual events as the currencies had been stable for many years. For example, a few Swedish-Finnish companies decided to switch some activities to Sweden to benefit from the low level of Swedish krona, the one receiving the most media attention being paper group Stora Enso.
For foreign providers, markets like Iceland or to a much lesser extent Sweden have become more challenging to target due to the higher cost of imported products in these countries.
The overall trend towards internationalisation that led to a growth of 5 to 15 % per year of exports and imports every year of this decade before 2008 is not broken; flows have slowed down for a year but are restarting. 2010 is going to offer many opportunities in the Nordic and Baltic region, including new perspectives born from the crisis.
Finland and Norway - 2010 key markets
These countries are the ones that should be the most interesting for foreign providers in 2010.
Finland saw a sharp decline (around -20%) in its imports and exports in 2009, but both are forecasted to restart their growth next year.
The competition on the healthcare market is often weaker than in neighbouring countries, and as Finland has the lowest healthcare spending per inhabitant in the Nordic region, there is still margin for a regular increase of funding to consolidate a welfare state fully supported by the population. Finland has also followed a strong innovation policy, with massive public and private investments, and a partial reduction of the financial flows is pushing the start-up companies (chiefly in Biotech) to review their strategy, go to the market and develop new partnerships, with always a strong international focus.
In industries, the downturn has been harder and industrial production will take a couple of years to reach its pre 2008 level, but the current situation leads to a larger incorporation of technologies allowing cost reductions as well as environmentally friendlier technologies.
When compared to most European countries, Norway did not suffer much from the crisis. The government is using its large profits built from oil & gas production to support innovation and the home market remains dynamic. The healthcare market relies heavily on imports and is not affected as much as some other countries by cost cutting strategies.
The biggest industrial groups had a 2009 year often better than their initial prospects (i.e. Norsk Hydro, StatoilHydro, Yara…) after implementation of efficient cost cutting measures. Small losses are compensated by large profits of the previous years and the prospects for 2010 are markedly better.
Denmark and Sweden will also keep being interesting markets in 2010 for most providers. Sweden, despite the exchange rate issue and the more frequent risk of competing with a local provider, remains the biggest market among the Nordic countries, both for healthcare and for industrial supplies. This country is difficult to ignore when willing to develop in the region. Denmark remains a very stable economy, widely opened towards foreign markets, with a high purchasing power and a strong innovation policy.
As the economic situation has been more difficult on the Baltic markets, 2009 has been a fairly bad year to enter one of these markets except in few niche activities. 2010 will definitely be better, though not as promising as in the Nordic countries. For foreign providers without any experience of these markets, it can be a good year to explore and understand them. It will pay to be ready to benefit from the high growth rate, prevailing during most of the decade and likely to return in the following years in their process of leapfrogging development and convergence towards the Nordic country income level.
In the healthcare sector, spending per inhabitant remain around 1/3 of the Nordic neighbours' level, and 2009 has been only a pause in a 2-digit annual growth started in the mid-90's. Industries will continue their modernisation process, especially with a massive incorporation of cleantech solutions.
Should choices be made to prefer some countries to others, Estonia, still expected to adopt Euro in 2011, seems to be following its path out of the crisis whereas the prospects remain grimmer in Latvia at least until mid-2010.
In Iceland, the low exchange rate of the króna is likely to hamper foreign attempts to enter this small market next year, despite a spectacular stabilisation of the economy only one year after a complete collapse of the financial system. Innovative products can still find their way on this highly technology advanced market.
3rd of November 2009