Nordic Outlook - March 2019

Nordic Outlook is economic and financial trends from the Nordic countries, prepared by our analysts.

Highlights



Background


The global economy is looking weaker, with continued concerns over growth in China and a lot of discouraging data from the manufacturing sector, not least in the euro area. A lot of this weakness is likely to prove temporary. 

One reason is the current uncertainty about both the US-China trade war and Brexit, both of which we hope to get some clarification on. Another is the sharp slowdown in China, which looks likely to be reversed following the large amount of stimulus from Chinese authorities. Our main scenario is that the global economy will regain momentum and again support Nordic growth. Even so, there is a risk that we face a period of more prolonged weakness.  

So far, though, the Nordics have been resilient to the global manufacturing slowdown, broadly speaking. Danish exports and industrial production have actually accelerated and Swedish manufacturers remain surprisingly upbeat. Finnish exports are supported by shipbuilding for the time being and Norway is more dependent on global oil investments than on the global manufacturing cycle - and oil investments are looking strong.


However, the Nordic countries are also in quite different positions and at different levels of risk from a more prolonged global slowdown. Even in the base case, we expect a pronounced decline in growth in Sweden for domestic reasons and export weakness would clearly hurt. Finland is slowing already, but is not at a similar risk of a sharp housing price drop as Sweden. Denmark will clearly weaken if Europe does, but has unusually large resistance compared to previous crises. It is difficult to see a scenario where Norway’s economy weakens, at least in the near term. With Finland as a possible exemption, the Nordic countries have ample opportunity to use fiscal policy to counter a crisis.

Las Olsen 

Chief Economist, Danske Bank