In the asset finance markets in the Nordic countries, equipment leasing and long-term rental new business volumes (NBV) have continued to show the fluctuating fortunes seen in recent years.
The only national market to suffer a decline in NBV in 2015 was Norway, mainly as a result of the downward pressure on oil prices caused by the global decrease in demand for commodities and energy having an adverse effect on investment.
However, elsewhere volumes grew, particularly strongly in Denmark and encouragingly in Finland, which experienced a second year of growth following a series of declines.
Nordic countries – equipment leasing NBV, ex-real estate (€ million)
Source: National Associations, Leaseurope
It should be noted that the national associations in Finland and Sweden are estimated to represent around 80% of their respective leasing markets, as compared with some 90% for the equivalent bodies in Denmark and Norway, so total business volumes can be expected to be proportionately somewhat larger in the former markets – although growth rates and trends should be assumed to be unchanged.
Individual rates of growth have varied considerably over recent years, with only Denmark avoiding a year-on-year decline in growth since 2010; however, the combined annual growth rate (CAGR) evens out exceptional annual figures and provides a view of the longer-term trends. Over the five-year period from 2010 to 2015, Denmark stands out with a CAGR of just under 10%, followed by Sweden on 7%, with Norway and Finland managing to keep in positive territory.
Nordic leasing markets, NBV growth ex-real estate (year-on-year)
Source: National Associations, Leaseurope, Asset Finance International
At the time of writing, the only national figures available for asset finance NBV in 2016 are for Denmark and Norway, and both sets are positive.
In Denmark, NBV in the first quarter totalled close to €1.9 billion, a rise of over 12% over the same period a year earlier, and indicating the growth trend there is continuing.
Further good news comes from Norway, where the Association of Norwegian Finance Houses (FINFO) reported a return to growth. Commenting on total market performance, Christina Åhlander, managing director FINFO (pictured above), told Asset Finance International: “In H1 2016 the market for new leasing business in Norway grew by 15% compared to a 2% drop in the market in 2015. There was particularly strong growth in H1 2016 in equipment leasing, which grew by 11%, and auto leasing grew by 21% due to high sales of passenger cars and increased market share for finance companies in the passenger car market.”
Regarding the near-term prospects in Norway, Ms Åhlander said: “The fall in oil prices still affects the economy, but the expansionary fiscal policy, low interest rates and a weaker exchange rate is helping to underpin activity in other sectors. There is still much uncertainty regarding the development of the Norwegian economy but positive signs are that the fall in oil investment is now easing, while export industries and domestic tourism are benefiting from a weak krone.”
Exchange rate fluctuations can also affect periodic comparisons. For example, as cited above the market in Norway dropped 2% year-on-year in 2015 in Norwegian krone, but in euros it fell 9% as shown in the chart. Both Norway’s and Sweden’s currencies have weakened in recent years, making the performance of the asset finance markets in Norway and Sweden appear weaker when seen in euros – but the general trend patterns remain, regardless of currency.
Nordic economies – strengths and weaknesses
Projections for GDP growth have been gradually adjusted down as 2016 has progressed, but of the Nordic countries Sweden remains the leading economy, but rates are predicted to converge.
In Sweden, domestic demand has bolstered recent growth rates, but this is expected to fall back. Renewed energy sector investment should help Norway’s economy, which has suffered from low global oil prices. Growth in employment will stimulate demand and investment in Denmark, although the effects of Brexit may be most keenly felt here. Unfortunately for Finland the prospects remain for only subdued growth and a further fall in competitiveness with its neighbours.
Nordic countries – real GDP growth
Source: Nordea Markets, September 2016
As already mentioned, unemployment levels are generally stable or improving, especially in comparison with the EU average which remains stuck in double digits.
In Denmark unemployment has been very stable throughout the year, at a little over 4%. Norway’s figures have been low but have just started to creep up to 5%. Levels have been somewhat higher in Sweden, but have returned to below 7%. And the best news has come from Finland, where unemployment has dropped from over 10% to just over 7% in August 2016.
Looking at inflation, the long-term target of 2% remains a distant prospect for most EU economies. This includes the Nordic countries apart from Norway, where inflation has been above 2% for over a year and peaked at 4.4% in July 2016. However, here the reduction in the base rate seems to be having an effect, with inflation now returning towards 3%. Elsewhere, figures for recent months show little change, even falling back to zero in Denmark. The EU average has at least showed signs of moving away from negative inflation, with small incremental increases for five consecutive months to September 2016.