After 15 months of shifting restrictions and a succession of lockdowns and reopenings, the outlook is finally for a more normal state of affairs.

“The Nordic countries have had 15 months of oscillating between restrictions and easings as COVID-19 infection rates ebbed and flowed, but now we are on a definite course towards reopening – and  despite individual differences between the countries, the economic data point in the same direction", says Danske Bank’s chief economist, Las Olsen, who along with his team of economists expects the Nordic economies to be back at pre-corona levels of unemployment and production capacity utilisation in 2022:

"Consumption is rapidly normalising, while exports have the wind in their sails due to strong global demand for manufactured goods and products.” 

Atypical recovery
That being said, the recovery has so far been historic and atypical. Lay-offs and increasing unemployment have been replaced by bottlenecks and labour shortages in several sectors, while fears of economic activity completely stalling have been replaced by worries of overheating.

However, labour shortages, soaring house prices and the risk of higher inflation are probably transitory phenomena, says Las Olsen.

“The powerful recovery has prompted clear signs of overheating, particularly in the shape of rising prices on industrial components, materials shortages and transportation disruptions. However, our view is that these problems will ease as the global economy normalises and demand shifts back from goods to services,” says Las Olsen.

House prices set to flatten
He notes there is still a great deal of uncertainty, but that Danske Bank does not expect inflation in the Nordic countries to surge. The same applies to the housing market.

“House prices have soared across the Nordic countries during the corona crisis, just as we have seen in many other parts of the world. However, we view much of this as reflecting a proportion of the consumption curtailed by the corona crisis instead being channelled into the housing market, and therefore we expect house price growth to start flattening as consumption normalises and also because interest rates have begun to rise", says Las Olsen and adds:

"Nevertheless, a great deal of uncertainty surrounds the housing market, too, not least given discussions of possible intervention.”