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.