2017 State of the Region Report

in Publications

Under the heading “The Top of Europe – A Competitive Baltic Sea Region Ready for the Future?”, this year´s BDF State of the Region Report once again takes the temperature on growth, innovation and competitiveness in the Baltic Sea Region (BSR). The three authors Christian Ketels, Helge J. Pedersen and Mikael Olsson analyses the BSR economy and assesses the state of the region, thus helping decision makers and observers inside and outside of the Region to navigate in a challenging environment.


Heading towards BDF´s 20th anniversary in 2018, the report will provide a basis for discussions at the 20th BDF Summit in Tallinn on 4th June 2018 as well as the 9th Annual Forum for the EU Strategy for the Baltic Sea Region on 4th -5th June 2018 in Tallinn, co-organized by BDF and the Estonian Ministry of Foreign Affairs in collaboration with the European Commission.

The 2017 State of the Region report is divided into 4 main parts:

  1. Economic Outlook: This year´s report confirms that the BSR´s economy is doing well. Growth rates are up, employment is robust, and the deep crisis before 2010 is starting to fade away. Current conditions are better than what many expected only a year ago. The political shocks that were the reason for the nervousness in the past have not yet materialized. Economic sentiments are positive and even investment seems to be picking up. However, the economic cycle might be nearing its peak, which could leave many economies facing tightening monetary policies just as demand is weakening. Structural changes driven by new technologies and changing patterns of globalisation continue to work their way through the economy, with many of the implications not yet well understood.
  2. BSR Competitiveness: The BSR economy is going on all cylinders. Prosperity growth is strong across the Region, and the catch-up of the less prosperous south-eastern part continues. However, growth dynamics, especially productivity growth, is markedly down since the crisis. While the most recent data is encouraging, it is hard to interpret the evidence as a return to pre-crisis conditions. As a result, also the speed of catch-up within the Region has become much slower. This is a real concern given the large differences in prosperity levels that continue to characterize the BSR.Competitiveness fundamentals across the BSR continue to be strong. Where issues exist, for example in translating research capacity into economic activity, they have been present for some time. The post-crisis slow-down in productivity and catch-up is thus likely to be  driven by more structural changes affecting economies globally than by choices made within the BSR.
  3. The Subnational Regional Perspective: This year’s State of the Region-Report takes a closer look at developments at the sub-national level and finds that the dynamics at the subnational level are even more heterogeneous, with especially rural regions struggling. Overall the BSR, particularly its more advanced north-western part, does better on providing opportunities also for these regions than many other advanced economies. But within-country differences and the growing dominance of a modest number of large metropolitan area is clearly an issue to be aware of, especially given the low average density across the Region.
  4. BSR cooperation: BSR collaboration has achieved many of the objectives, particularly with regards to removing the boundaries that has kept the Region apart before 1990. The question is what role the Region has for the broader challenges that exist, especially those that require political decisions at the national level. The emerging response seemed to be that while the Region can play this role to some degree, it is not really doing so at the moment. Instead, it plows ahead with the operational tasks under existing collaboration structures, especially the EU Strategy for the Baltic Sea Region.

The BSR has a unique perspective to offer, and its heterogeneity makes its voice in many respect even more important. For many countries in the Region working together provides the best hope to be a part of the discussion rather than a mere recipient of the decisions made by others. If the Region wants to embark on such a path, launching Baltic Sea Region 2.0, will require a clear decision that leaders across the Region are ready to go drive this process. It will not be easy, but can build on the strong foundations created across the Region over the last three decades.

Download the Full Report Here