Danish Business Club

Selection_270On the 22nd of November, 87 delegates filled the Danish embassy in Prechistensky Pereulok. This was the first ‘Finance Day’ organised by the Danish Business Club, EKF (Denmark’s official export credit agency) and the Royal Danish Embassy. According to Kasper Ditlevsen (Chairman of DBC), not the last “we were amazed by how many people wanted to come, we actually had to turn people away, so we will definitely be looking to organising another event like this next year.”

After a welcome speech by the Danish Ambassador Thomas Winkler, Steen Grondhal, the Head of Corporate Banking International at Nordea, gave the first of two keynote speeches on the Global Macroeconomic situation. “The general feeling is that we have a turnaround, but we have still not reached anywhere near the level of growth that we enjoyed before the crisis.” His company predicts global growth to be “just under 4% this year, with even the ‘old world’ beginning to deliver results, with the exception of the Eurozone.” Steen mentioned that the Eurozone’s predicted growth rate of only 1% next year is in part due to high labour costs. The other issue with Europe, Steen said, is the concept of Europe itself. “If there were to be elections tomorrow, France and The Netherlands would probably vote for far right parties which would vote not to stay in the EU. But raising trade barriers is not the way to solve the main problem, which is lack of growth.” Steen traced the current problems back to the collapse of the Soviet Union and rise of globalisation. “Entrepreneurs flocked Eastwards to make money, and many did, instead of investing in their own economies. When globalisation created the possibility of sitting comfortably at home whilst production was moved east, there seemed no reason to increase productivity at home. Then came the crisis, and as a result, countries live in debt. France, for example, has not balanced its books since 1974. Basically, Europe cannot afford to be as well off as it was before the Berlin wall came down, and this is something that many have not realised yet.”

In America, Steen said, the level of personal debt has decreased, Americans are repaying their debts and the US consumer is back. The amount of disposable income that Americans need to pay off their debts is about 10%, which is an acceptable amount. People are now less worried about losing their jobs than before, and so the whole consumer confidence train has started moving, and under the new chairwoman of the Central bank, tapering is likely to start this year, in a gradual process, however interest rates are likely to stay on hold until 2015. In general, Steen felt that growth in the US will outpace that of Europe.

Steen’s forecast for oil prices was roughly flat. Steen saw the situation in Denmark improving, predicting growth returning to pre-crisis levels in 2017.

The Russia story was carried on by Chris Weafer, senior partner of Macro-Advisory.

Chris started off his presentation by indicating that developing markets in particularly China has been down played enough over last year, and that probably they will grow again quite strongly this year, as will dividend payments from Russian companies such as Gazprom. In contrast to the world wide view as in Russia, he said, “we have an opposite picture. We have a very strong balance sheet, with growth falling. The question is next year for the government, whether or not the right decisions are going to be made to encourage growth or whether we are looking at a decade of low growth.”

“Clearly there is uncertainty as to what exactly is going to drive Russian growth in the future. It is no longer the oil price, nor is it the consumer, although retail is still comparatively good in Russia, but not enough to sustain the economy. So there needs to be anew driver, and that driver has to come from a big pick up in investment both from Russian and from foreign investors. This will demand a restructuring of the economy.

“Last year opportunities were missed in part due to continuing global uncertainty witnessed for example when Bernanke announced that tapering would start, which affected investment into emerging markets. There are a number of contradictions in Russia, for example, lending rates are far too high, about 17% if you are a small business or an individual, although the central bank’s basic rate is just over 6%. We are forecasting 1.8% growth next year.

After the keynote speeches ended, delegates chose from 5 ‘cafes’ in different parts of the surprisingly large Danish embassy complex, each of which ran focus groups on a separate issue such as: short-term financing, medium to long term financing, public purchases, assessing the macro economic climate of Russia and establishing legal set-up in Russia, M&A, Tax &Business Location Services.

Judging by the reaction of attendees, and the quality of the group leaders who were all practitioners in their own fields, the Danish Business Club was on target when it chose themes for the focus groups. They seemed to spark off general interest, and discussions were peppered wit real life examples and situations.