Nordic Outlook June 2017

Economic and financial trends

  • Denmark: As good as it gets
    - The recovery has gained momentum, but is not likely to accelerate further. •
  • Sweden: Was that it?
    - Growth is stabilising at a lower level, but is also becoming better balanced.
  • Norway: Returning to normal
    - The recovery is beating expectations.
  • Finland: Full speed towards potential
    - Strong growth is rapidly normalising the economy.

A truly pan-Nordic recovery: No country left behind

This year has so far been one of mostly pleasant surprises in the Nordic
economies. In particular, growth in Finland has staged a remarkable comeback
driven by increasing demand from consumers, investments and exports, and
Finnish growth will be significantly above the European average this year.
Norway has clearly turned the corner after the slowdown caused by lower oil
investments, as other sectors are taking over. Danish growth has been above
expectations, in line with what we see in most of Europe. The exception is
Sweden, where growth has slowed, but there are signs that it is becoming more
balanced and thus sustainable. After several years of very different outcomes
across the Nordic countries, we now have convergence in growth of around 2%
or better.

Prospects are good, but not likely to become much better. The recovery in
Norway has room to accelerate but in the other countries, growth next year will
at best be similar to what we are seeing now. We expect global growth to cool
somewhat, as China slows down and the political boost to growth in the US
that many were looking for is not materialising. That will affect the Nordic
countries. The very high current growth rate in Finland will be challenged by
lower spending power in households and the need for fiscal consolidation. In
all four countries, as in the rest of the world, a slowdown in productivity growth
has lowered the potential growth rate in the economy. Growth of 2% is now
higher than can be expected in the long run.

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