Global risks and local strengths
The global economy is still strong in the sense that it is growing above its longrun potential, but it seems we are facing a period of declining growth, as the period of simultaneous recovery and low inflation and low interest rates is ending. The risk of a sharper global slowdown is also increasing. That is reflected in the outlook for the Nordic countries, which are highly dependent on external factors, but which are also in very different positions.
If we look through the noise created by volatile GDP numbers, Denmark is set to slow in line with the rest of Europe. If risks materialise and the global slowdown becomes more severe, Denmark would also suffer but we do not see the risk of an especially deep crisis, at least not for the country as a whole. Finland’s remarkable recovery is already slowing down but growth rates remain high, and also here, concerns for the domestic situation are limited, even if there is a global crisis of some sort.
Sweden, on the other hand, is facing a more pronounced domestic slowdown, especially centred on the housing market where years of high investment growth are ending. Swedish manufacturers have maintained their optimism, but a more pronounced slowdown in Europe would further slow Sweden as well. Housing investment has also weakened in Norway, and other indicators have softened recently, but the outlook for oil investment growth has become even stronger. In light of that, it would take a lot of global trouble to make us pessimistic about Norway in the next few years.
Political risks on the agenda
Political events such as Brexit, trade wars and the Italian budget crisis are attracting significant attention and have the potential to seriously disrupt the global and European economies. In the Nordics, elections are due this year in Denmark, Finland and possibly Sweden, where it is proving very difficult to form a government after last year’s election. As that illustrates, Nordic political divisions can also be hard to overcome, but fundamental changes to the economic framework do not seem to be on the agenda.