Nordea Economic Outlook: Past the peak
The prospects for the global economy are still relatively good, despite significant monetary policy tightening. Inflation has fallen sharply, and central banks will likely start cutting rates this year. This increases the chances of a soft landing, but uncertainty is high, says Helge Pedersen, Nordea Group Chief Economist.
The Nordic economies are feeling the effects of higher interest rates and weaker global demand. Denmark and Sweden are already in a technical recession; Finland is likely to follow suit; and economic activity in Norway has flattened. The outlook should brighten in the second half of the year, as interest rates come down and consumer purchasing power strengthens.
The Danish economy entered a technical recession in 2023 after several years of high growth. The number of bankruptcies reached a decade-high last year, and households are increasingly affected by higher interest rates. We expect renewed progress in mid-2024 on the back falling interest rates.
Higher interest rates have also sent the Finnish economy on the road to recession as they will likely continue to be a drag on private consumption, construction and exports in the first half of 2024. However, we expect a rebound in the second half of the year as lower interest rates boost consumer purchasing power.
Activity has flattened in the Norwegian economy, but we see better times ahead. Interest rates have finally peaked, and while the descent will be sluggish, slightly lower rates will gradually improve households’ purchasing power. Expect higher housing prices after the summer and a slightly stronger NOK longer out.
Sweden will see weak economic growth in the near term. Inflation is normalising and interest rate cuts are approaching, which should lower the risk of a deep recession. However, interest rates will stay higher than before the pandemic, and households and businesses will need to adjust to the higher funding costs.
GDP growth forecast, % year-on-year
| 2022 | 2023E | 2024E | 2025E | |
|---|---|---|---|---|
| World | 3.6 | 2.9 | 2.9 | 3.0 |
| Nordics | 2.8 | 0.2 | 0.1 | 1.9 |
| Denmark | 2.7 | 0.7 | 1.0 | 1.7 |
| Finland | 1.6 | -0.5 | -1.0 | 2.0 |
| Norway | 3.8 | 1.1 | 1.0 | 1.5 |
| Sweden | 2.9 | -0.3 | -0.5 | 2.2 |
| Source: Nordea Markets | ||||
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)
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