Nordea Economic Outlook: The Inflation Standoff

The global economy got off to a good start in 2023, driven by a sharp fall in energy prices, strong labour markets and the reopening of the Chinese economy. This doesn’t mean growth prospects have improved since the winter, however. Inflation is still too high, requiring further monetary policy tightening. The need for a rapid green and digital transition, coupled with sharply rising defence spending, will change global demand over the coming years, says Helge Pedersen, Nordea Group Chief Economist. 

The same pattern will likely emerge in the Nordic countries, which are incidentally among the economies that fared best during the pandemic. But economic activity is also slowing down in the Nordics. Near term, the effect of high inflation and monetary policy tightening poses the greatest uncertainty. This cocktail is severely affecting property and retail markets everywhere, not least in Sweden.

The Danish economy has been surprisingly strong. After a period at full steam, the economy is now poised for a soft landing. Household spending has fallen in the wake of rising interest rates. Expect activity to pick up again towards the end of the year as real wage growth turns positive again.

The Finnish economy has surprised positively in the first months of 2023, but the outlook for the rest of the year is weaker. Household spending is under pressure, and exports are slowing down. But the increase in electricity output and the strong labour market will support the economy.

Household consumption and housing prices have held up in Norway, and unemployment has remained record low. Strong wage growth and significant NOK depreciation are prolonging price pressures. We expect the policy rate to reach 3.75% and economic activity to flatten out this year.

The Swedish economy continues to contract in 2023. While the labour market has been extremely resilient, households are struggling with high inflation and increasing interest rates. We expect inflation to fall this year, but interest rates will still be significantly higher than before the pandemic.

Read Economic Outlook here

GDP growth forecast, % year-on-year

For further information:

Helge J. Pedersen, Group Chief Economist, Tel: +45 55471532, Mob: +45 22697912
E-mail: helge.pedersen [at] nordea.com (helge[dot]pedersen[at]nordea[dot]com)

We are a universal bank with a 200-year history of supporting and growing the Nordic economies – enabling dreams and aspirations for a greater good. Every day, we work to support our customers’ financial development, delivering best-in-class omnichannel customer experiences and driving sustainable change. The Nordea share is listed on the Nasdaq Helsinki, Nasdaq Copenhagen and Nasdaq Stockholm exchanges. Read more about us at nordea.com.