How is the Baltic Sea Region doing in terms of competitiveness and regional collaboration? Key points from the 2014 State of the Region-Report (http://www.bsr2014.eu/wp-content/uploads/BDF_SORR_2014_web.pdf). Presented at the BDF Summit in Turku, June 2014

1. State of the Region-Report 2014
The Top of Europe:
Emerging from the Crisis, Adapting to the New Normal
Helge J. Pedersen
Global Chief Economist
NORDEA
Dr. Christian H.M. Ketels
Institute for Strategy and Competitiveness
Harvard Business School
Timo Summa
School of Business
Aalto University
Full report: http://www.bsr2014.eu/wp-content/uploads/BDF_SORR_2014_web.pdf

2. Economic climate in the Baltic Sea
Region
Global Chief Economist Helge J. Pedersen
Turku 3. June 2014

3. Baseline scenario – fragile growth
• World growth is driven by the advanced economies – Emerging Markets are
having problems
• BSR looks more promising than rest of Europe:
– Baltic recovery led by Latvia and Lithuania
– Sweden to lead growth among the Nordics
– Germany to pull Poland
– Russian stagnation
• Geopolitical risks related to the situation in Ukraine/Russia
• Lenient monetary policy for long time yet
3

4. Return of growth – but still risks ahead
4

5. Economic sentiment is lagging the EU for the first time
since 2008
5

6. Labour market improvement …
6

7. …with big country deviation – youth unemployment
pose a big political problem in many countries
7

8. Government debt : The best in class
8

9. Less economic misery than in most other places on
earth
9

10. State of the Region-Report 2014
Competitiveness and Collaboration
Across the Baltic Sea Region
Dr. Christian H.M. Ketels
Institute for Strategy and Competitiveness
Harvard Business School

11. The Permanent Prosperity Loss from the Crisis
15000
20000
25000
30000
35000
40000
45000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
NAFTA
GDP per capita (PPP adjusted)
US-Dollar,
EU-27
Baltic Sea Region

12. Prosperity Dispersion Within Cross-National Regions
2000 - 2013
1
2
3
4
5
6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Ratio of GDP (PPP adjusted) per
Capita, Richest to Poorest Country per
Region
Baltic Sea Region
EU-15
EU-27

13. The New Normal?
BSR EU-15 NAFTA BSR EU-15 NAFTA
Before the Crisis After the Crisis
Labor
Productivity
Labor
Mobilization
Prosperity
Growth
accounted
for by:
Note: Annual Growth Rates 2004-2008 and 2012-2013; labor mobilization = hours worked per capita, labor productivity = GDP per hour worked
Source: Conference Board (2014)
4.5%
3.0%
1.5%
0%

14. Baltic Sea Region Exports
Total Value over Time
0
200
400
600
800
1000
1200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Services
Oil/Minerals
Goods
Export Values, in billion US-
Dollars in Current Prices

15. Baltic Sea Region FDI Flows
0%
2%
4%
6%
8%
10%
12%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
FDI outflow - annual
FDI outflow - 3-year average
FDI inflow - annual
FDI inflow - 3-year average
World market share

16. Overall Competitiveness and Prosperity, 2013
500
5000
50000
Denmark
Iceland Sweden
Finland
Norway
Estonia
Latvia
Lithuania
Competitiveness Score, 2013
GDP per Capita, US‐$ (PPP adj.), 2013
HighLow
Germany
Russia
Poland

17. The Baltic Sea Region’s Competitiveness Profile 2013
Macro (18)
Political Institutions
(22)
Rule of Law
(22)
Human Development
(21)
Context for Strategy and
Rivalry (28)
Related and Supporting
Industries (27)
Demand Conditions
(23)
Factor Input Conditions
(21)
Micro (23)
Comm. (16)
Innov. (19) Admin (27)Skills (23)
Logistic. (25)
GDP pc (21)
GCI (20)
Social Infra-
structure and Pol.
Institutions (20)
Macroeconomic Policy
(21)
National Business
Environment (24)
Company Operations
and Strategy
(20)
Source:UnpublisheddatafromtheGlobalCompetitivenessReport
(2013),author’sanalysis.
Significant
advantage
Moderate
advantage
Neutral
Moderate
disadvantage
Significant
disadvantage
Capital (29)

18. Strength
Weakness
Cost of Doing Business: Government Regulations
Baltic Sea Region Countries
Denmark
yNorway
Finland
Iceland
Sweden
Lithuania
yGermany
Estonia
5
9
12
13
14
17
21
22
Overall Rank ‘14
Trading Across Borders
Registering Property
Construction Permits
Paying Taxes
Insolvency
Enforcing Contracts
Getting Credit
Protecting Investors
Starting a Business
Source: World Bank (2014)
Subcategory
Latvia 24
Poland 45
Russia 92

19. 440
460
480
500
520
540
560
Math
Science
Reading
Problem solving
Mean score
Educational Performance
PISA Study Results 2013, Selected Countries
Source: OECD (2014)

20. Key Trends Affecting the Region
Globalization
Knowledge-
Driven
Economy
Environmental
Sustainability
Demographics Urbanization

21. Strengthening Governance of the EUSBSR
Better aligned…
…but in need of structure