NIB President: Nordic Baltic region should use its strengths

In order to maintain its competitive advantages, the Nordic Baltic region should make the most of its strengths: sound economic policies, knowledge-based economies and a healthy banking sector, says Henrik Normann, NIB President & CEO, in an interview with NIB Newsletter.

Recent studies on the economic climate in the Nordic Baltic region point out that the fundamentals of the region’s competitiveness remain strong and its economy is generally in a better shape than in many other regions of Europe and globally.

“Although the region is competitive, we must not ignore the signs of slowing down and being affected by the general economic trend in larger Europe. We need more growth, more long-term investment activity to implement our sustainability targets and to keep the economy going,” says NIB President.

“We should continue to build the necessary power links and upgrade the railway system in the region. Interconnections will allow the entire region to utilise renewable energy and a developed railway network will help decrease the pollution from road transport. This is included in our mandate and NIB, providing long-term financing, can play a significant role in these activities.”

Mr Normann believes the Nordic Baltic region should use its strengths to remain competitive and make the best of opportunities the crisis provides.

“Politicians did a great job in the 1990s balancing budgets, reforming the pension system and enhancing labour mobility. Sound economic policies give us important advantages of low public debt and relative prosperity,” says Mr Normann.

“The region has a potential of being attractive to investors. We need to promote our openness and continue the progress in creating a single market with the same rules and policies. We need to learn from each other—for instance, fromFinlandon education—to nurture our knowledge-based economies.”

Global economic powerhouses, such as Brazil, India or China appreciate skills and knowledge developed in the Nordic Baltic region. During his recent visit to NIB, the Chinese Vice-Minister of Finance, Li Yong, welcomed companies from the region to introduce innovative cleantech solutions in China. Mr Normann continues:

“Our region commands significant expertise in the areas that China is setting as priorities for its next five-year plan—water purification and wastewater management, a clean environment, and mix between country and cities. This is a very good chance for the Nordic and Baltic companies to expand.”­­

Speaking about the financial sector in the Nordic Baltic region, NIB President agrees with sector analysts that the ample liquidity provided for the market in recent years has supported commercial banks but has not done much to encourage lending to business, particularly smaller enterprises.

“The financial sector in the region is in very good shape. Financial institutions have improved their balance sheets, done much provisioning and increased capital,” says Mr Normann.

“Traditional lending opportunities compete with the growing appetite of the corporate sector for tapping capital markets. As a result, prices have gone down significantly and the spreads for lower-rated companies have halved in the last five years. We are down at 5–6% in nominal terms on what used to be the high-yield market.”

Mr Normann sees the significant potential that small and medium-sized enterprises (SMEs) render to economic growth. SMEs have been hit hard by the crisis and are still struggling for survival.

“It is of key importance to ensure that capital is available for all principal sectors of the economies in the Nordic Baltic region. Insufficient supply of capital implies a risk that businesses become less likely to invest. In collaboration with commercial banks and other financiers, NIB is seeking ways to improve the accessibility of longer-term financing for investments in energy, infrastructure, transport and other sectors essential for keeping up competitiveness,” Mr Normann concludes.