The Nordic economies will also be affected by the war in Ukraine. However, they all benefit from having had a strong starting point before the war, when the risk of overheating was the common Nordic economic narrative. Finland will be affected the most, Norway the least.

The Danish economy is well positioned to withstand the new challenges. As the slowdown started while activity was high, it may at best prove to be a welcome cooling of the economy. But the uncertainty is high, and a more pronounced slowdown cannot be ruled out. One question is how resilient the housing market is to the rising interest rates and the fall in households' purchasing power.

In Finland, the collapse of exports to Russia, higher energy prices and shortages in materials will have a negative impact on growth. Yet export prices of raw materials and commodities produced in Finland have shot up, keeping Finland's terms of trade unchanged. Savings accumulated by households will help sustain private consumption despite a fall in real incomes. 

Economic activity in Norway is now at a very high level. Competition for labour and high inflation are pushing up wages, while the war in Ukraine intensifies the inflationary pressure. With an economy under pressure and rising price and wage growth, Norges Bank will continue its quarterly rate hikes until end-2023. Housing prices look set to remain fairly stable, but we would not rule out a small decline.

The Swedish economy is strong but entering a phase of subdued growth as high inflation and rapid rate hikes slow activity. The higher interest rates pose a test for households, with falling housing prices and stagnating consumption. We expect home prices will start to fall in H2, while the labour market will improve further before levelling out next year.

Read the Nordea Economic Outlook here (https://docs.nordeamarkets.com/nordea-economic-outlook/economic-outlook-2022/eo-en-02-2022/?utm_source=press&utm_medium=pdf&utm_campaing=eo2202-en#/).

GDP growth forecast, % year-on-year

2019 2020 2021E 2022E 2023E
World 2.9 -3.2 5.9 3.3 3.2
Nordics 1.9 -2.6 4.3 3.1 1.3
Denmark 2.1 -2.1 4.7 3.5 1.0
Finland 1.2 -2.3 3.5 2.0 1.5
Norway 2.0 -2.3 4.2 3.5 2.0
Sweden 2.0 -3.2 4.7 3.1 1.0
Source: Nordea Markets

For further information:

Helge J. Pedersen, Group Chief Economist, Tel: +45 55471532 | Mob: +45 22697912
E-mail: helge.pedersen@nordea.com