Nordic outlook: better times ahead, just not yet …

The Nordic countries had a roller coaster year in 2020 with spikes and falls of infections rates and economic output. But the suffering has been less severe than elsewhere, and the outlook has improved. Eficient vaccines and a Brexit trade deal reduces economic uncertainty while trade wars now look more unlikely under a coming Joe Biden-presidency in the US.



Highlights

Although the pandemic has been less severe and the economic impact comparably milder, the Nordic countries have had a roller coaster experience in 2020 similar to most other countries with significant swings in economic activity and output as coronavirus infection rates have risen and subsided in wave after wave, writes Danske Bank’s macroeconomic team in their quarterly Nordic Outlook report. 

After a rebound in the spring and summer as economies emerged from lockdown, a sharp contraction in the fall on the back of rising infection rates was followed by a strong but partial rebound as restrictions were eased before economic activity and sentiment once again dropped with soaring infection numbers. 

Recovery ahead
Nonetheless, the macroeconomic team at Danske Bank expect a strong recovery in 2021 as immunisations and warmer weather will slow the spread of coronavirus and allow economies to lift restrictions and lockdown measures. 

“Most of the recovery will come simply as a result of opening up, with the remaining adjustment back to normal activity happening more gradually and more or less completed in 2022. This is not like the great financial crisis where the economy took a long time to heal”, they write. 


The recovery can disappoint, but the Nordic countries are well equipped to support the economy if necessary. There is also the possibility that the upswing becomes significantly stronger than we expect, as large amounts of purchasing power are released together at a time of very accommodative economic policy.

Las Olsen

Chief economist, Danske Bank



Less uncertainty
While the role out of highly efficient vaccines lowers the risk of a new or prolonged corona-related crisis, the outlook for trade has also improved with the Brexit trade deal reducing uncertainty and trade wars looking unlikely under a Joe Biden-presidency in the US. 

“The recovery can disappoint, but the Nordic countries are well equipped to support the economy if necessary. There is also the possibility that the upswing becomes significantly stronger than we expect, as large amounts of purchasing power are released together at a time of very accommodative economic policy", Danske Bank's economists write.  

Concerns about overheating, not least of local parts of the housing market, could well resurface in the coming years”, writes Danske Bank’s team of economists.