Baltic Sea economies expand again – but to remain competitive, more reforms are needed

- "We expect GDP in the Baltic Sea region, after shrinking by almost 6% last year, to grow by 2.6% in 2010 and 3.1% in 2011. The European sovereign debt crisis, with lower demand and financial turbulence as possible consequences, poses major forecast risks."
- "Russia and Ukraine show the strongest growth over the forecast horizon (2010 and 2011), following substantial declines last year and with the support of higher commodity prices. However, without a more ambitious reform agenda, growth will not be sustainable. Russia (4.5) and Ukraine (4.1) also score the lowest in the region in our new Baltic Sea index (BSI) on business conditions, in which the average for the region is 7 (out of a possible 10)."
- "Poland has avoided a recession and is set to grow by a moderate 3% per year, as domestic demand growth will slow when budget consolidation takes off. Also, Poland has room for improvement on structural reforms, scoring 5.8 in our BSI. The goal to join EMU remains, but entry is not likely to be before 2015."
- "Estonia, on the other hand, is set to join EMU in 2011. Latvia and Lithuania plan to follow in 2014 if their budget consolidation processes continue. The Baltic countries will grow by 3-4½% next year and have already started to recover slowly after the recession. Estonia (7.3) scores above the BSI average (high on foreign trade, governance, and education), while Lithuania (6.5) and Latvia (6.3) must accelerate structural reforms to catch up."
- "The Nordic countries score the highest in the region on the BSI and are, at 8.5-8.8, among the 15% most competitive countries in the world. GDP in Sweden and Norway (2 ½-3% per year) will grow faster than GDP in Denmark and Finland (1-2% per year), but all four countries must boost labour supply as competition and demography remain major challenges."
- "Germany is projected to grow by 1½-2%, with exports recovering. As fiscal consolidation starts next year, there is a risk that domestic demand will slow. As for all countries undertaking fiscal consolidation, the negative effects on demand must be compensated for by economic reforms that create room for higher medium- and long-term growth. Germany, scoring 8 on our BSI, is doing well, but there is room for improvements, especially with regard to labour markets and tax policy."
Swedbank Baltic Sea Report 20100630