Economies were heading for a new phase both globally and in the Nordics even before the Russian invasion of Ukraine. With the war in Ukraine, this new phase has become more manifest, says chief economist at Danske Bank, Las Olsen, whose team has just published an assessment of the status quo and the economic outlooks across the Nordic countries – outlooks that are significantly clouded by the uncertainty arising from the war in Ukraine.

"The recovery from the Covid-19 crisis is over in the sense that unemployment is no longer elevated while demand is high and inflation is picking up. So, growth has to slow. The war has further complicated the situation, especially by triggering higher and very volatile energy prices, which reduces spending on some items whilst also resulting in added inflation and constrained output", says Las Olsen.

Nordic countries comparatively better positioned
Like their fellow Europeans, Nordic consumers are feeling the effects higher energy and commodity prices but with more Nordic households relying on communal heating and electricity to heat their homes, soaring oil and gas prices are impacting the Nordic countries less than other European countries.

"The Nordic countries have all come through the Covid-19 crisis with fewer scars than most other European countries and have also all had strong recoveries. Now, they once again find themselves in less unfortunate circumstances than their European counterparts. With the exception of Finland, the Nordic countries had limited trade with Russia before the war, and with lower oil and gas dependencies, they are also experiences less of an inflation shock", says Las Olsen.

Las Olsen also stresses that the Nordic countries are nonetheless facing a worsened economic outlook and will likely see harder times ahead.