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Nordic outlook: goodbye crisis, hello uncertainty

With corona restrictions lifted and economic indicators at or above pre-crisis levels, new risks are emerging for the Nordic economies, writes Danske Bank’s macroeconomic team in their latest Nordic Outlook report, highlighting the risk of rising inflation and stagnating growth also known as stagflation.

The COVID-19 crisis and subsequent lockdowns negatively impacted all Nordic countries with substantial levels of lost production. But losses were significantly smaller than elsewhere in Europe and with restrictions now lifted and GDP and employment numbers at or above pre-crisis levels, the Nordic countries can now look back on a crisis that has been very different from previous crises. 

“The decline was extremely steep, but so was the recovery, and we do not now have a long recovery period ahead of us – most of it has already happened”, says chief economist at Danske Bank, Las Olsen in the newly published Nordic Outlook report. 


Our main scenario for Nordic and global economies is a soft landing where we return to more or less normal levels of growth.

Las Olsen 

Chief Economist, Danske Bank

New risks emerging

But with COVID-19 largely behind them, new risks are emerging for the Nordic economies. 

“Our main scenario for Nordic and global economies is a soft landing where we return to more or less normal levels of growth, which is the aim of economic policies. We are already seeing a moderation in global growth, and there is clearly a risk that this moderation turns into a more severe slowdown, which would impact the open Nordic economies.”

“Global supply disruptions are limiting activity and are part of the reason why inflation has increased, leading to so-called stagflation risks – not a return to the economic problems of the 1970’s under that name, but a tricky situation for global policy makers and central banks as they may face both economic slowdown and accelerating prices at the same time. We have no experience with this very different type of crisis and recovery and the risk of misjudging is high”, says Las Olsen. 

In addition to supply chain disruptions, many Nordic businesses are short of labour. To some extent, that is the result of a reopening process with many companies trying to recruit new staff all at once, and Las Olsen expects this to level out although he stresses that the labour market is clearly one warning sign of potential overheating. 

“Another is housing markets, where we have seen house price growth moderate to some extend following reopening but where prices have increased strongly during the restriction period”, says Las Olsen.