NIB offers investors safety and comfort

According to Dutch sociologist Ruut Veenhoven, who runs the World Database of Happiness, people in the Nordic region are among the happiest in the world, and this is despite high taxes and the effects of the global financial crises, which also impacted the Nordic and Baltic countries. This happiness also seems to be reflected in the difference between European countries where the Nordic area today shows a better economic outlook.

NIB's owners, the five Nordic and the three Baltic countries are small and fairly homogeneous countries with open economies. However, taken together as a regional economy, the NIB area's aggregate GDP is the 10th largest in the world and ahead of, for example, India and Russia (IMF/HSBC, 2009 figures).

"Although the NIB member countries have definitely been challenged by the crisis, the Nordic-Baltic figures look better compared to the rest of Europe," says Jens Hellerup, Head of Funding and Investor Relations at NIB.

In the below table, key economic forecast figures are shown for NIB's member countries, weighted by the ownership of NIB, and compared to the whole euro area. The forecast for GDP growth and unemployment for the NIB area is favourable, and the Nordic-Baltic countries' governments have manoeuvring room to support the economy, as the NIB area's weighted average public deficit and public debt are relatively low and within the Maastricht criteria.

2010 forecast comparison

Source: Eurostat/European Commission, as per 15 November 2010 

These positive fundamentals have also been noted by the capital market. The figure below shows the 5-year credit default swap (CDS) spread for Denmark, Finland, Sweden and Norway (representing 96% of NIB's ownership) compared to Germany.

"Germany is typically seen as one of the strongest economies in the world, and traditionally seen as a safe haven. The situation has changed during the last months and the premiums for credit protection on the Nordic countries are today lower than on Germany. This means that the capital market considers the majority of NIB's owners to be among the most credit-worthy countries in the world," Mr Hellerup comments.

5-year credit default swap 2010 spread development
(click to enlarge)

 

Source: Bloomberg, as per 16 December 2010

"When we meet investors in different countries around the globe, we often need to explain the regional economic developments in Europe. The regional differences are in fact in favour of NIB, because 80% of NIB's total loan outstanding goes to the Nordic and Baltic member countries and the remaining 20% goes to emerging market countries. This gives NIB a strong loan book, which many investors today see as a low risk investment and a good diversification opportunity," Mr Hellerup concludes.

December 2010

Back to cases and feature stories

Back to the top