Nordics doing relatively well
The crisis has hurt the Nordic economies, but the decline has been significantly less than elsewhere in Europe. While there are differences in business structure and lockdown policies, performance across the Nordics has been remarkably homogenous.
One common factor in the policy response has been a strong focus on keeping unrestricted businesses, such as manufacturing and construction, up and running, for example by avoiding curfews and stay-at-home orders.
Policy response supportive
Nordic governments have loosened purse strings to help citizens and businesses through the crisis. The milder recession means the cost for government has been less than elsewhere and generally also less than anticipated, so there is no urgent need to restore public finances – although Finland still faces a longer-term challenge.
Monetary policy has also been eased, especially in Norway, which started the crisis with positive interest rates that could be cut. Norway is also likely to be one of the first countries to hike rates again this year, while we expect a weak inflation outlook to keep rates in check in Sweden and the euro area. Denmark, meanwhile, is actually likely to see a modest rate cut.