With the economic consequences of the Covid-19 pandemic becoming apparent, the livelihoods of millions of citizens across the Nordics and Baltics are under threat. NordicBaltic.Tech, a partnership between PUBLIC Denmark and the Nordic Council of Ministers, takes a look at how governments, employers and startups across the region are attempting to tackle the impact on personal finances and welfare due to Covid-19.

Covid-19’s impact on income and welfare

As citizens around the world stay at home to slow down the spread of Covid-19, the economic effects of the virus have become undeniable. With the majority of consumers stuck at home and many everyday activities being put on hold, businesses face a sharp fall in demand. The car industry is facing a 30% drop in sales in the coming year, while UK demand for energy has already dropped by 20% due to offices and factories shutting their doors. Earlier this month the IMF predicted that Covid-19 might cause the worst economic downturn since the Great Depression, with economic growth falling to -3% in 2020. This downturn is not only fuelled by the immediate effects of shoppers being stuck indoors, but also due to the disruption of supply chains and growing uncertainty among consumers. 

Countries across the Nordics and Baltics are experiencing contractions similar to the rest of Europe. In Denmark, personal spending dropped by 66% in March, with a similar drop of 70% in Finland. The only country that seems to be bucking the trend, with the rate of unemployment claims being four times lower than other countries across the Nordics, is Sweden. Unlike almost all other European nations,  Sweden has not imposed strict lockdown rules, with a large number of businesses remaining open.

The economic downturn is putting workers’ livelihoods at risk. In late March, 1 million employees across Europe lost their jobs in less than 2 weeks. Experiences in the Baltics echo this trend. Based on data from the Latvian State Employment Agency, over 7000 individuals across Latvia have lost their job in the past two months and this is expected to be merely the beginning of much deeper cuts to employment. McKinsey predicts that the economic consequences of Covid-19 could leave up to 59 million European jobs at risk, with unemployment rising to 11.2%. 

The economic effects of Covid-19 are also being felt by self-employed workers. In fact, in Europe the self-employed appear to be among the hardest hit, as they are over-represented in sectors that are the most affected,  such as the arts, recreation and construction. A decrease in income is also more acutely felt by those who are self-employed. According to Eurofound, financial vulnerability and economic dependence is high among self-employed workers. 

The impact of the economic effects of Covid-19 on citizens’ welfare is not limited to income uncertainty. One crucial example is the rising risk of food shortages. Agri-food supply chains are disrupted due to labour shortages as employers cannot guarantee to protect their workers from infection. In addition, the closing of borders is making it increasingly difficult to transport food around the globe. The Committee on World Food Security notes that suppliers will likely struggle to battle these difficulties, as a drop in food prices will decrease the resources available for investments in supply-chain solutions. The World Food Programme predicts that these combined effects will lead to an additional 130 million individuals being at risk of food shortages.

Nordic and Baltic government support 

Across the Nordic and Baltic region, governments have been implementing policies to protect the welfare of citizens against the consequences of the pandemic. Among a range of policies, four key types of initiatives can be identified:  

  • Supporting personal finances by covering wages and reducing taxes

Governments in the Nordics and Baltics are implementing policies to protect the personal finances of citizens, especially those whose income has been compromised by the pandemic. Not only will this support citizens’ welfare, but also dampen a decrease in consumer demand. State support often comes in two forms: coverage of lost wages and tax relief. Denmark has pledged to cover 75% of the salaries of employees paid on a monthly basis who would otherwise have been fired, with companies paying the remaining amount. In addition to similar wage protection schemes, Iceland and Latvia are also providing tax reliefs. In Latvia, taxpayers affected by the crisis will be able to apply for an extension of tax payment deadlines for up to three years 

  • Self-Employment support 

 Many self-employed workers are usually not eligible for standard unemployment support. Therefore, governments across the region have created several schemes to ensure that the self-employed who are experiencing a fall in income due to Covid-19 will also receive some form of support. For example, Norway has created a temporary scheme to secure self-employed and freelancers who are not included in the unemployment benefit scheme and to give self-employed and freelancers paid sick leave.  

  • Cover for sick days 

As the coronavirus spreads across the Nordics and Baltics, more citizens than usual are falling ill or need to take care of sick family members. Recognizing the importance of those infected staying at home and vulnerable individuals being taken care of, a range of special ‘sick day’ measures have been instituted. Norway has doubled the number of days parents can stay home with sick children and the Swedish government has pledged to temporarily pay for sick leave of self-employed workers. Lithuania has freed up additional funds to support care for the sick and disabled, including support for parents of school children who need to stay home and sick leave support for the self-employed.

  • Investments in healthcare and health insurance 

 To stimulate the economy, many states are announcing new investment packages, some of which we discussed in our article on government support for startups. To ensure that the health of citizens is not compromised during the pandemic and the further economic downturn that is likely to follow, several countries have invested in their healthcare sector. Latvia announced that about €8 million has been earmarked to cover salary increases for about 4,500 “front line” medical workers. In addition, about €2 million will be allocated to mass media outlets to spread reliable information about the virus and about €14 million will be used to increase the capital of the three largest hospitals Estonia has also acted to support its healthcare sector, by investing an additional €213 million into its health insurance fund.

How Nordic and Baltic companies protect their employees 

Companies can and have also been taking steps to reduce the number of jobs at risk due to Covid-19 and ensure the welfare of their employees. Some of the most common measures taken by employers include:  

  • Increasing remote work capabilities

 Many companies have moved to carrying out most or all of their operations remotely, to ensure that business activity can continue and workers remain in their jobs, without exposing employees to the risk of infection. We discuss the move to remote working more extensively in our remote working trends article.

  • Redeploying non-utilized workforce 

 While staff in certain sectors is currently not being utilized, other sectors and companies are in desperate need of additional workforce. To protect employment, several ‘workforce’ sharing platforms have been created that allow companies to allocate their workforce amongst each other to fill labour shortages and reduce redundancy. 

In March, Share Force One was launched in Estonia with the aim to support workforce sharing. Share Force One matches companies based on applications indicating that they are in need of staff or currently have an underutilized workforce. After a match is made, Share Force One provides the two companies with relevant contract templates to simplify the process.

  • Moving production to in-demand goods 

To protect jobs that are at risk from a sudden drop in demand, many suppliers have shifted their production to goods that have become in-demand due to the Covid-19 pandemic. For example, to protect itself and its workers from a sudden drop in demand due to restaurants and bars closing, the Danish Naturfrisk group has moved from distilling alcohol to producing hand sanitizer.

The role of startups

Besides aiming to protect their own staff, startups have been supporting the effort to ensure the welfare of all citizens during the pandemic. One area in which startups are playing an active role is the redeployment of underutilized staff. Being familiar with the process of quickly hiring and re-skilling staff, it comes as no surprise that startups have developed several crucial workforce sharing platforms. The Share Force One workforce sharing platform was developed by members of the Estonian sTARTUp community and headed by the organizer of sTARTUp Day. In addition, the Swedish recruitment startup Agile Search has created an initiative to pair redundant tech talent with startups that are hiring during Covid-19.

Given the financial impact of the Covid-19 pandemic, FinTech startups are playing a crucial role in helping individuals manage their finances during this time of uncertainty. As incomes are compromised, loans of all types are likely to rise in demand. While banks are still leaders in providing personal loans, their processes are often complex to navigate and require in-person visits. Meanwhile, fintechs like the Swedish Klarna, have payment systems that integrate with existing shops and online, make lending for consumer goods easier than ever.

As the demand for loans increases, consumers will want to ensure they are getting the best deals and clarity about their outstanding credit. This creates an opportunity for startups like AnyFin that makes loan refinancing easy, so that customers avoid falling prey to overly high interest rates or unexpected fees. In addition, AnyFin allows users to manage all their loans in one user-friendly app. Since  Swedish startup was founded in 2017, the company has helped customers in Sweden to lower their interest rates on consumer loans by an average of 50%.

In addition to an increased importance of personal loan services, FinTechs that provide peer-to-peer payment solutions will also play a crucial role in the Covid-19 financial landscape in which the physical exchange of money is no longer a possibility. Cross-border payment solutions, like those offered by the Estonian startup Transferwise, will be of specific importance, as border closures will make sending money to friends and family in foreign countries more relevant. Transferwise makes sending money abroad easier than with a traditional bank, as it bypasses expensive exchange fees and converts the currency at mid-market exchange rates.

Other sources used

Startup Day article on Share Force One
IMF Policy Responses to Covid-19 
FinExtra insight on Covid-19 and Fintech
Eu Startups profile on AnyFin