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There is no doubt in our minds that the economic impact of the new coronavirus and the measures taken against it is very large for the Nordic countries. The measures taken so far aim at both preventing bankruptcies and layoffs and developing policy measures to support liquidity and credit markets. So far, there is less emphasis on stimulating demand through large-scale fiscal easing but we might see more of this in order to support a strong recovery after the crisis. The Nordic countries all have strong public finances, strong credit ratings and well-capitalised banks and all are well positioned to use fiscal policy in the crisis.

The Nordic countries are each different. Norway has an exceptionally strong fiscal position but its economy has exposure to both the COVID-19 outbreak and the oil price collapse. Norway is characterised by a large high-yield market. Sweden and Norway have been able to utilise their monetary policy and the currencies have depreciated, supporting competiveness. In respect of credit measures, we highlight that Norway will reopen a NOK50bn government supported credit fund and the Swedish Riksbank has initiated a SEK300bn QE programme in government bonds, Kommuninvest and covered bonds. It is difficult for the Danish central bank to engage in traditional QE due to the currency peg but the experience from 2008 shows it can enact measures that will be supportive for the Danish covered bond market. All central banks have introduced liquidity measures to support market functioning, banks and corporates.

The counter-cyclical buffers have been lowered to zero percent in Denmark and Sweden and lowered from 2.5% to 1.0% in Norway. In Finland, the counter-cyclical capital buffer rate was already set at zero but here the FSA has lowered the systemic risk buffer as well as bank-specific requirements, effectively lowering the capital requirement by 1% (in addition to the relaxation of capital requirements announced by the ECB last week).

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