“We need to do better, and in a smart way”
This morning Lene Espersen, Chairman of Baltic Development Forum (BDF) opened the 16th Baltic Development Forum Summit in Turku, Finland. EU Commissioner for Regional Policy Johannes Hahn, Minister for Economic Affairs Jan Vapaavuori, and Mayor of Turku Aleksi Randell also took part in the opening session attended by more than 1.200 high-level participants from business and politics as well as experts, opinion-leaders and decisions-makers of the Baltic Sea Region.
In her opening address, Lene Espersen presented her vision for the Baltic Sea Region as one of the most competitive, dynamic and innovative regions in the EU and globally.
“While we as a region are generally well-positioned in trade, innovation and investments, we are also challenged with competition from new powerful emerging regions. We need to do better, but we need to do it in a smart and clever way. We need “smart specialization” in key growth sectors where we are already in the forefront. We need “smart regions and cities” leading the way for sustainable solutions in energy, climate and environment. And we need “smart cooperation” involving both the private and public sector. It is a way to boost innovation, growth and prosperity by using our region´s strongholds”, Lene Espersen underlined.
Dr. Christian Ketels presented this year´s State of the Region Report “The Top of Europe: Emerging from the Crisis and Adapting to the New Normal”. In his presentation of the report, Christian Ketels underlined that “Our Region remains highly competitive, outperforming the rest of Europe on many levels of economic dynamism – it is the “Top of Europe’ in more than geographical terms. It is particularly encouraging to see that the catch-up processes within the Region have survived the crisis. This year’s Report does, however, also signal the more difficult road ahead: there are signs of not only our Region entering a “New Normal” of permanently lower growth dynamics. How to deal with a changing global economic environment in this and other dimensions will be a key task for the Region in the coming years.”
Helge Pedersen, Nordea´s Chief Economist addressed the opening session on the region´s economic performance and competitiveness and said that “After a few difficult years economic growth seems to return to the Baltic Sea Region driven by a strong economic performance in countries like Germany and Sweden. However, risks are still biased to the downside – and not least related to the geopolitical risks surrounding the Region.”
State of the Region Report 2014: The Top Europe – Emerging from the Crisis, Adapting to a New Normal
There are signs that the Baltic Sea region and its 11 countries are entering a new normal of permanently lower growth, and it is difficult to see where powerful new growth drivers should come from. Furthermore, the political situation in Ukraine could influence negatively. These are some of the main messages in this year’s report.
The political situation in the region is influenced by the crisis in Ukraine and the difficult neighbourhood with Russia. The Russian economy is already paying the price for the Russian Government’s policies in Ukraine. The economy was already struggling before the crisis with macroeconomic headwinds due to the lack of structural reforms. Massive capital flight and the uncertainty of trade sanctions have only made it harder for Russia’s economy.
The economic relationships between Russia and the rest of the region are exposed and it could influence growth negatively. On the other hand, only Finland and the Baltic States have export between 10 pct. (Finland) and 20 pct. (Lithuania) to Russia. For the rest of the region, figures are below 5 pct. so the economic implications of the current crisis are meaningful, but still likely to be modest in the overall context of economic trends, the State of the Region highlights.
Generally, the crisis has been overcome. This was the main message of last year’s report presented in Riga, Latvia, but the recovery has been much slower and less powerful than the recovery from previous downturns. The region remains the “Top of Europe” and registers both prosperity growth and internal catch-up rates that outperform rest of Europe, but growth has decelerated, and it seems now insufficient to close the gap with the leading economies elsewhere in the world, the report also underlines.
It is part of the “new normal” of the region that the underlying competitiveness fundamentals are still solid as well as the short-term macro-economic trends. But there are serious questions to be addressed on both a national and regional level about how to enhance competitiveness. The report hints at the need for more integration, innovative systems, more talents as well as transport and energy networks. The report also states that the region has a lot to gain from continuing its trend towards having knowledge as the key production factor. The clean tech industry is also promising, but it requires a clearer strategy to succeed.
Prof. Christian Ketels, Principal Associate at Harvard Business School, once again presented the report at the opening of the Summit, this year together with Helge Pedersen, Chief Economist at Nordea Bank, Copenhagen. Dr. Timo Summa has also contributed to the report presenting the state of affairs in terms of cross-border collaboration projects and priorities. The report calls for better governance structures to leverage the framework of the EU strategy for the Baltic Sea Region.
State of the Region Report 2014