Economic consequences of the pandemic – The Nordic countries

The global pandemic created by the Covid-19 virus (officially named SARS-CoV-2) has had major negative economic consequences in numerous countries, including the Swedish economy and in particular the Swedish business community. The Swedish Corona Commission decided to have a background report in which the measures undertaken by the Swedish government to mitigate the economic consequences of the pandemic are evaluated in a comparative perspective with respect to other Nordic countries (Denmark, Finland and Norway).
The main findings of the report are:
• From a macroeconomic perspective the developments in the major Nordic countries during the pandemic have been qualitatively similar and the differences have been quantitatively small or at most moderate. The first wave of the pandemic triggered a severe drop in economic activity but the recovery has been swift in all four Nordics bringing activity by mid 2021 back to or slightly above the pre-pandemic level. There are significant sectoral differences in impacts and recovery, and in particular service and tourism related sectors have been affected.
• The four Nordic countries introduced big packages of unconventional, even unprecedented support policies to help firms, labour markets and households. The measures were introduced quickly as a package in the very beginning of the pandemic, and there were many subsequent changes which makes it impossible to assess the efficacy of single policy measures. The report gives a qualitative discussion and assessment of the pros and cons of key support measures.
• The policy packages in the four Nordics differed in detail, though they had the same aim of supporting firms, labour markets and households through the difficult period. While many design issues can be discussed, the policy interventions have succeeded in preserving production capacity and job matches to make a swift recovery possible. The packages have not only maintained production capacity by supporting jobs and firms but also ensured that domestic demand was largely intact by supporting the income of households. This may be interpreted as a two-handed approach to which addressed the economic consequences of the pandemic.
• The policy strategy was not without risk, and it is probably crucial that the containment restrictions were only applying for a relatively short period of time, and with an interim reopening between the two waves (rather than one long period of equal total length). The economic support measures have a status-quo bias and may stifle reallocation of human and real capital and thereby reduce economic performance in the future. It is therefore essential that such non-market conform interventions are temporary.
• The Nordic countries have done well compared to other most other countries. Denmark, Finland, and Norway are among the countries having experienced the mildest health and economic consequences. The economic consequences in Sweden are at about the same level as the other Nordic countries, but so far the health consequences have been more dire.
• The pandemic is continuing with a new wave of infections due to the omicron variety of the virus, so it is premature to make final assessments of the economic impacts.