How are the Nordic countries recovering from Covid-19?

by Jauri Häkkä, Principal at Widhaby Advisors and consultant for United Bankers Asset Management.

The number of new Covid-19 infections has been on the rise in most European countries in July. The figures are, however, significantly lower compared to the beginning of the year and there is still much less pressure overall on the healthcare infrastructure and hospital wards.

In spite of that, the developments in the last few weeks are causing concern. In the UK, The Netherlands, France, Denmark, Spain, Portugal and Greece, average daily cases per 100 000 people are in the double digits and the trend seems to be rising.

The rest of Europe seems to remain in single digits per 100 000 people, albeit with a mostly rising 14-day trend. Mika Salminen, Director at the National Institute of Health and Welfare in Finland, commented recently that new restrictions may be decided upon in the coming days. – If you want to talk about waves, it is likely that we are now in the fourth wave of Covid-19, Salminen says in an interview with the Finnish MTV Uutiset news channel.

Anders Björkman, Professor in infectious diseases at Karolinska Institutet in Sweden, has earlier warned that the so-called Delta variant could lead to an increased spread of the virus. It is estimated to be 60% more infectious than the Alpha variant, which has been the dominant one since the beginning of the year. Björkman says that it is likely that daily cases will increase and a new wave of infections is imminent. – I think one can say that this is the beginning of a fourth wave, he says in an interview by Swedish daily Svenska Dagbladet.

It appears to be unlikely that the expected increase in infections would lead to a significant rise in the number of hospitalised Covid-19 patients or deaths due to the disease. If the situation in the UK is a relevant precedent, the pressure on the healthcare system is not going to increase in the same proportion as infections during the summer. The older cohorts of the population are well protected by vaccines, but more cases with long-term symptoms will occur among people in their 20’s or 30’s.

Björkman supports increased vaccination campaigns and an intensified contact tracing activity in order to limit the spread of infections and does not believe that the announced lifting of restrictions would need to be postponed.

All in all, the Nordic region seems to have succeeded in limiting the worst possible outcomes of Covid-19 through vaccination campaigns. Doses administered per 100 people (and the percentage of fully vaccinated) are 130 (70%) in Iceland, 123 (53%) in Denmark, 101 (40%) in Sweden, 99 (33%) in Finland and 97 (33%) in Norway.

These numbers compare fairly well with, for example, 103 (49%) in the United States, 126 (56%) in the United Kingdom, 109 (51%) in Germany, 108 (50%) in Austria, 104 (48%) in Switzerland, 111 (51%) in Italy and 104 (46%) in France1.

Local updates in Sweden released on 29th July indicate that 50% of the adult population in Sweden has now been fully vaccinated. But what is required to reach so-called herd immunity, i.e. a sufficient level of immunity to halt the spread of the virus?

Tom Britton, Professor in Mathematical Statistics at Stockholm University, says in a recent interview with Svenska Dagbladet that a reasonable assumption regarding the original Covid-19 variant would have required a 60% immunity in the population to achieve that. This would imply that 65-70% would have to be vaccinated, as efficacy of current vaccines is not 100%.

This is supported by Joakin Dillner, Professor in Infectious Epidemiology at Karolinska Institutet, seems to agree. He takes up the UK and Israel as examples of countries where the spread of infections slowed down considerably at a 60% level of fully vaccinated in the population. Dillner reminds that this was during the spread of earlier virus variants. With the more transmissible Delta variant, we may need a 75% level of fully vaccinated to reach herd immunity.

So, with this outlook on the pandemic, how is the economy doing? Let’s take a look at Sweden, the largest Nordic country by all measures. According to a Statistiska Centralbyrån (SCB) report released on 29th July, Swedish GDP increased 0.9% during the second quarter of 2021. The number predicted by Riksbanken, the Swedish central bank, was 0.4%. If we compare this with 2Q 2020, it is an increase of 10%. Riksbanken predicted 8.8%.

These are the highest numbers ever, since the beginning of SCB’s recorded statistics. So, what is driving this? Obviously, we were in the middle of the pandemic a year ago with many restrictions with a negative impact on economic activity. The outlook is positive in Sweden as it is for the entire Nordic region. It could be even better if there weren’t shortages of raw materials and components.

Just as a highlight from this week’s news flow on Nordic Large Cap equities: Nokia reported continued top-line-strength in Q2, net sales up 9% year-on-year, driven by growth across all business groups, with particular strength in Network Infrastructure. Considering the strong start to 2021, Nokia has revised their full year 2021 Outlook, including net sales expected to be up to EUR 22.7bn with comparable operating margin in the range of 10-12%.

The coronavirus does not discriminate by nationality. The differences in outcomes are likely to be a result of the effectiveness of the health care systems, including the administration of vaccinations, and the implementation of protective measures, social distancing guidelines and contact tracing. The impact of Covid-19 on the Nordic countries is not likely to differ significantly from, say, other OECD countries, where appropriate public health resources have also been available. The differences in outcomes may, however, depend on adopted strategies to mitigate the effects of Covid-19.

To end this overview with an optimistic note, we could conclude that the Nordic countries continue to offer stable destinations for investment, where business is supported by top-level infrastructure, advanced financial services, well-resourced public services, digitalisation, integrity and transparency.

The outlook for the Nordic asset management community remains positive. The demand for investment services has remained high throughout the pandemic, as interest rates have remained low and households have record levels of savings. Market returns have been strong since the recovery, with equities up nearly 60% from the lows of 2020. Investing in the Nordic region would certainly be an effective way for European investors to diminish their “home bias” and achieve better diversification in their investment portfolios. Many highly ranked asset managers based in the region are available to assist. Watch this space!


1) Source: Our World in Data and NYT, 30 July 2021

Jauri Häkkä, Principal, Widhaby Advisors. Jauri is the founder of Widhaby Advisors, a Stockholm-based firm focusing on investment strategy, asset allocation and portfolio construction, specialising on alternative investments, private markets and sustainability. Having 25 years+ experience in portfolio management and fund/manager selection, he has held senior positions at Nordic asset managers - including Executive Director and PM at Nordea Asset Management between 2006 and 2016. Jauri serves currently in several non-executive roles, including board memberships in APFI and Scandinavian Financial Research as well as senior advisor roles at C8 Technologies and Sijoittaja Group. He holds a MSc (Econ.) degree from Hanken School of Economics in Helsinki and is a Certified EFFAS Financial Analyst.