Swedbank: Nordic, Baltic economies will be hit hard but can bounce back

A new report on the likely impact of the global COVID-19 crisis on the economies of the Baltic states suggests that though they are likely to be hit hard, they may rebound more strongly than many other countries.

"The Nordic and Baltic economies will be hard hit by the COVID-19-induced shock due to their small size and relative openness. Strong economic fundamentals and a timely reaction to the health crisis ensure that the countries are in an advantageous position to take on the challenge," says Swedbank in its latest Nordic-Baltic Business Report.

"The crisis gives the Nordic and Baltic economies a chance to push for bolder policies and reforms that have previously been postponed due to the lack of sense of urgency or political will. As a result, the Nordics and Baltics can emerge from this fight even stronger, more competitive, and more sustainable,'' Swedbank says.

Talking about Latvia, the report says: "The Latvian economy has taken its lesson from the previous crisis, earning the right to use more flexibility in supporting the economy in the corona-world. The stumbling blocks are the previously insufficient investments in the digital economy and protracted reforms in health care and education."

"The digitalised are more resilient in corona times and will be quicker to flourish post-crisis. During these couple of months, we have seen even the most reluctant Latvian businesses going more digital at a turbo speed. This not only helps to weather the crisis but also increases competitiveness and boosts productivity in the longer term. However, growing digitalisation, in conjunction with the crisis hitting the least-well-off disproportionately hard, can add to the existing income inequality, as people with poorer digital skills and already lower incomes are left farther behind."

The pandemic has also made a very strong case for speeding up health care reform and increasing the sector’s funding. Similarly, education reform, currently in progress, is "badly needed", the report says, to "change the Latvian curriculum away from passive listening to embracing creativity, problem-solving and self-directed learning."

The full report is available to read online.

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