Geography of Economic Recovery Strategies in Nordic Countries
Hurtigruten near Nordkapp. The Arctic cruise sector has been especially hit by the COVID-19 crisis. Photo: Pauline Pic
With the onset of the coronavirus (COVID-19) pandemic, the world has found itself in a global health emergency, which has caused a dramatic loss of human life worldwide and brought normal life around the world to a halt for the better part of a year. The Arctic Institute’s COVID-19 Series offers an interesting compilation of best practices, challenges and diverse approaches to the pandemic applied by various Arctic states, regions, and communities. We hope that this series will contribute to our understanding of how the region has coped with this unprecedented crisis as well as provide food for thought about possibilities and potential of development of regional cooperation.
The Arctic Institute COVID19 Series 2020-2021
- COVID-19 in the Arctic: The Arctic Institute’s Winter Series 2020-2021
- COVID-19 and Arctic Search and Rescue, our Duty to Act
- Vulnerable Communities: How has the COVID-19 Pandemic affected Indigenous People in the Russian Arctic?
- Brazilians in the Arctic: A Global Experience with Mental Health during the COVID-19 Pandemic
- COVID-19’s Impact on the Administration of Justice in Canada’s Arctic
- Isolation and Resilience of Arctic Oil Exploration during COVID-19: Business as usual or Structural Shift?
- COVID-19: How the Virus has frozen Arctic Research
- Rethinking Governance in Time of Pandemics in the Arctic
- Russia’s COVID Blinders: Arctic Policy Changes or Lack Thereof
- Geography of Economic Recovery Strategies in Nordic Countries
- Fly-in Fly-Out Workers in the Arctic: The Need for More Workforce Transparency in the Arctic
- Measures Taken by the Canadian Coast Guard to Respond to the Pandemic in the Canadian Arctic
- COVID-19 in the Arctic: Final Remarks
On March 12, Erna Solberg, Prime Minister of Norway, announced “the most far-reaching measures Norway’s population has ever experienced in peacetime”1) in an effort to contain the pandemic. Although it is still early in the crisis, it appears that the pandemic and mitigating measures had an immediate impact on many sectors of society, and will probably have long-term effects as well. In this paper we aim to analyze economic recovery measures in Norway, Sweden and Finland. The objective is to develop a comparative analytical perspective to understand the contours of the economic recovery in these countries.
The Arctic Center at the University of Northern Iowa provides a daily update on the number of confirmed cases in the Arctic. As of January 11th, the number of confirmed cases was 373,539.2) The Russian and US Arctic have been hit the hardest, followed by Sweden, then Iceland, Finland and Norway. Those numbers are for the Arctic only. To a certain degree, they reflect how communities have been affected by the virus. In Canada for example, while some regions in the south were strongly hit, especially in the province of Quebec, the northern regions have managed to contain the pandemic so far, applying strict travel restrictions.3) In Nordic countries, however, the gap between the south and the High North is not so wide in terms of confirmed cases.
he situation is handled very differently in each country: the Swedish approach has been especially well-documented as the country chose a “herd immunity” approach with limited lockdown measures compared to its neighbours, which was a source of worry for Finland and Norway4) given the unique situation in the North, where traditional Saami territories are spread across national borders. Additionally, in the North, many healthcare workers commute between countries on a daily basis, such as between Finland and Sweden for example. Several healthcare practitioners practising in Norbotten live in Finland and a lockdown or quarantine measures would have harmed the healthcare system in northern Sweden.5) Thus, in the Nordic countries, the Northern territories have to face specific challenges, which is especially true for Saami communities, as the crisis has especially affected their traditional livelihoods. We therefore want to interrogate economic recovery strategies with regard to those specificities.
Background
Even though it is too early to draw definite conclusions, it seems clear that the pandemic had a strong economic impact, at every level and on every scale. On the global scale, of course, the main visible consequences were a significant drop in stock markets and large-scale layoffs. A paper dedicated to the economic consequences of the pandemic and the need for epidemic preparedness policies listed, among others, a significant reduction in income, the rise in unemployment, a reduction in productivity, and disruptions in the global supply chain.6) Oil prices also experienced a significant drop, reaching the lowest level seen in 18 years near the end of April.7) Those consequences were naturally felt at the national and local scale: in Norway for example, where the krone is very sensitive to oil prices, the currency suffered a record collapse.8) Overall, the global economic system slowed dramatically as a consequence of the measures taken to mitigate the pandemic.
As Heidar Gudjonsson, chairman of the Arctic Economic Council, puts it, “If globalization slows down, the impact is felt twice as hard in the Arctic”.9) Because the Arctic is increasingly included in global economic systems, this economic turmoil had significant consequences in the region, on several sectors.
Tourism
The World Tourism Organization estimates that the pandemic has caused a 22 percent drop in international tourist arrivals during the first quarter of 2020. For the Nordic countries, the latest data available from the Organization dates from July. In Norway, International Tourist arrivals dropped by 75 percent when compared to 2019. From April to June, they dropped by 95 percent. In Sweden during the same period, they dropped by 66 percent, and Finland experienced a similar drop, by 61 percent.10) In Norway, Sweden and Finland, international tourism represents more than 25 percent of visitors, so travel bans have a strong impact on the sector. In the North, tourism represents a critical industry, and aurora tourism was especially hit. Frigg Jorgensen, executive director of the Association of Arctic Expedition Cruise Operators, says that the consequences of the pandemic on the cruise sector will likely be very strong as some operators might have to cancel their entire season.11) She stresses that this will also have a strong impact on small communities, as many are heavily dependent on tourism.
Resource sector
The downturn in oil prices has affected production in the Arctic. In Norway for example, the Norwegian Government decided on cuts in the Norwegian oil production–– in June and July, the oil production was 52,000 barrels per day less than reference production.12) Besides the major drop in oil prices, the mining sector was also severely hit. First, early in the crisis, it appeared that mines were a “hotspot” for the spread of Covid-19.13) Several mines are in Sápmi and were affected by the pandemic. The controversial Nussir mine in northern Norway, for example, was supposed to resume operations in the first quarter of 2020 but had to delay because of the uncertainty regarding global markets.14) Overall, it is estimated that the global mining output will decrease by $8.8 billion because of the Covid-19 crisis,15) though a report from S&P Global Market Intelligence anticipates limited disruptions in the mining sector in Nordic countries. It is however still early in the crisis and prolonged difficulties in the sector might undermine the long-term vitality of extractive industry in the Arctic.16)
Transport and infrastructure
The transport sector was severely hit and it is expected that the consequences might affect the sector for much longer than the duration of the crisis. Air transport was the most affected: in Europe for example, between February and April, more than 90 percent of scheduled flights had to be cancelled. However, other sectors were also affected, as passenger car traffic decreased by 60 to 90 percent, and public transport and passenger rail decreased by more than 50 percent in the same period.17) While the freight sector was more resilient, maritime transport and port traffic were also affected as global trade declined. Overall, it is still too early to draw definite conclusions on how the sector will rebound, although there are already some signs of recovery. In the Arctic and northern regions, the impact is felt more strongly, according to Heidar Gudjonsson, as a reduction in global trade implied that some transport links would be breaking up, with a direct impact on communities.18)
Traditional livelihoods
The crisis has had a strong impact on traditional livelihoods. First, Sápmi is spread across borders in northern Europe and is the area of traditional reindeer herding. Border closure in early Spring 2020 had consequences on the sector. Covid-19 resulted in a decline in demand for reindeer products—but it is still uncertain how the pandemic will influence the price of reindeer meat.19) Interestingly, though, the crisis might have a positive impact on reindeer herding as fewer tourists means less likely conflict between reindeer herders and tourist companies. Another important element underlined by Christina Henriksen, President of the Saami Council, is that a large part of the Saami economy is Sapmi-wide. For example, the market for Saami handicraft (duodji) stretches through the entire Saami territory, meaning that restriction measures undertaken by the Nordic countries affected the sector. Festival audiences or large institutions such as the Saami University of Applied Sciences are also spread across the entire territory, so lockdown measures impacted people’s access to these facilities. Local communities were also strongly affected by the decrease of tourism. She additionally expresses concern that governments may rapidly develop new industrial projects in an effort to aid their economies, without properly consulting Indigenous communities, which would infringe on their rights and sovereignty.20)
The pandemic has a strong effect on the economic sector, at every scale. While it is clear that the global system was deeply impacted, it appears that this also had consequences at the local and even individual scale, and it might take longer for these levels to rebound as data is still limited to estimate how resilient local and traditional economies might be.
Specific Recovery Measures for Northern Peripheries
Several measures have been announced by governments to mitigate the economic consequences of the crisis, which are summed up in the table below.
| Norway | Sweden | Finland | |
|---|---|---|---|
| Importance of key measures (in % of GDP) | About 4.6% of the GDP (per authorities estimates) | Between 11 and 17% of the GDP (if fully utilized) | About 3% of the GDP |
| Employment | Larger wage subsidies for temporary layoffs More generous unemployment benefits | Wage subsidies for short term leave More generous unemployment benefits Temporary rent subsidies for vulnerable sectors | Unemployment agencies will receive additional €20 million government aid Self-employed will not be required to close businesses to be entitled to unemployment aid |
| Social benefits | Household income protection Expanded sick leave and childcare | Supplementary housing allowances to families with children Right to compensation for people who belong to risk groups and for family members of people who belong to risk groups | Expanded parental allowance, social assistance Supplementary budget to support the most vulnerable in society for which restrictive measures imposed due to the pandemic have generated additional costs |
| Support to businesses | Scheme to compensate heavily affected but otherwise sustainable businesses Temporary lowering of the employer’s social insurance contributions Grants for start-ups | Loans to Small and Medium Enterprise (SME) ”Business transition support” could be given to companies where the decrease in net sales is an effect of the Covid-19 situation | Grants to SME & self employed Specific support for restaurants and catering business |
| Transport and infrastructure | Subsidies for domestic air routes Suspension of aviation charges | Infrastructure investment Support to regional transport and to regional airports Capital injection to SAS and state-owned enterprises Credit guarantee for Swedish airlines | Recapitalization of Finnair |
| Education & Research | Expanded funding for education and training | More funding to the media, culture and sports sector | Research on Coronavirus |
| Tax measures | Lowering of reduced VAT rate from 12 to 6% Deferral of various tax payments Temporary amendments to the petroleum tax system | Deferral of payments of companies’ social contributions Deferral of VAT for 2019 | Lower pension contribution until the end of 2020 An extension for corporate income tax return filings which taxpayers can apply for No penalties for late TVA filing |
This table shows that the three countries considered have implemented relatively similar measures to mitigate the economic consequences of the crisis. It might be worth noting that most of the aid in transport has gone to the aviation industry and airlines rather than shipping. It also looks like the default scale for mitigating measures was the national scale. We emphasize, however, that Sápmi stretches across national borders, so these measures impacted Saami economies differently. Some specific measures then had to be implemented in northern peripheries to consider specific challenges inherent to these regions.
Reindeer herding has been early on considered by Norway and Sweden as an ‘essential’ activity, meaning that herders could keep up with their activities and cross borders without having to quarantine.22) The Saami parliament of Norway and the Norwegian government also provided economic support to Saami businesses. Of course, Saami businesses were also eligible for the nationwide benefits implemented across Norway. Although national measures show some level of similarity between the three Nordic countries, it appears that specific measures for the north were more fragmented. Additionally, the cancellation of events such as festivals, markets, conferences, and seminars due to COVID-19––which are important meeting venues for Saami communities––had a strong detrimental impact, especially for small businesses that rely on those events to sell traditional handicrafts or to perform. The president of the Saami Council, Christina Henriksen, thus said in an interview with the Arctic Council that a more culturally-sensitive approach to pandemic measures should be taken when it comes to Saami communities.23)
Conclusion
It was initially difficult to craft an effective response to the pandemic, since it was difficult to say what it would bring or how long it would last. Yet over the last year, we have gained some perspective. Although it is still difficult to predict what the long-term consequences of the pandemic will be, it is still possible to reflect on the first response and analyze what has been learned so far. Given the virus’s rapid spread, drastic yet differing approaches were taken in the three Nordic countries discussed above. Tourism, the resource sector, transportation and infrastructure, traditional livelihoods: all sectors were hardly hit by the crisis. Responses usually used the national scale as a default parameter, especially for the first three mentioned and as underlined in table 1. However, when it comes to the Northern peripheries of Norway, Sweden and Finland, this national approach seems to be unfit for the needs of the Saami economic framework. As Sápmi is spread across national borders, a national response necessarily fragments the territory and endangers a traditional way of life. A more coordinated response taking the specificity of this Saami territory into account would allow for a more culturally appropriate response. Geography and the cultural use of space should therefore constitute default parameters to consider when handling a crisis.
Pauline Pic is a PhD Candidate in the Department of Geography, Université Laval (Québec, Canada). This research has been funded by the OPSA (Observatoire de la politique et de la sécurité de l’Arctique) and the Ministry of International Affairs of Quebec.
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