Nordic Economies Economic Forecast

Economic Snapshot for the Nordic Economies

August 30, 2017

DenmarkFollowing the jump in the previous month, the consumer confidence index released by Statistics Denmark came in at 7.6 points in August, which is significantly below the prior month’s 10.5 points. Despite the deterioration in consumer confidence, August’s reading is still the second highest so far this year.

FinlandIn June, economic activity in Finland contracted a working-day adjusted 0.5% over the same month last year, contrasting May’s 2.8% increase as per the Monthly Trend Indicator of Output released by Statistics Finland. The result was driven by a contraction in the services sector, which was enough to offset solid gains in the agricultural and manufacturing sectors. 

Norway: Political debate is heating up ahead of the 11 September parliamentary election, as the main political parties unveil their tax policies and the gap between Jonas Gahr Støre’s Labour Party and the ruling Conservative party narrows. Prime Minister Erna Solberg is benefiting from the strong economic recovery after the period of dismal economic performance in 2014–2016 that followed a plunge in oil prices. The most recent surveys signal that the Conservatives and their center-right allies are now slightly ahead of the center-left coalition. While uncertainty about the outcome of the presidential election, especially regarding the direction of the new tax system, has the potential to present downside risks to the country’s economic outlook, the elections should not bring a sharp reversal to Norway’s economy, as the main parties all recognize the importance of the oil sector and support more moderate withdrawals from the intergenerational fund. Along with oil and gas exploration, the key themes of the September election are tax reform and oil wealth spending.

SwedenFollowing the slowdown in growth that kicked off the year, the Swedish economy accelerated in the second quarter of the year to register the fastest pace of growth since the fourth quarter of 2010. The acceleration was primarily caused by a pickup in fixed investment and private consumption. A quarter-on-quarter comparison showed that the economy grew a seasonally-adjusted 1.7%, above Q1’s 0.6% increase. The quarterly reading overshot market expectations of 1.0% growth. A year-on-year comparison revealed that the economy grew a staggering 3.9% (Q1: +2.4% year-on-year).

Iceland The economy is poised to grow robustly this year on the back of the tourism sector, private consumption and fixed investment. However, it isn’t all smooth sailing: Fears over tourism are surfacing, and the fishing industry’s output has lagged due to strikes and the strength of the krona. Tourism, the biggest industry, is affecting housing and rental prices, and the overall cost of living, as prices for staple goods rise due to significantly increased demand. Moreover, the IMF commented in a recent staff visit that, although the economy is on a firmer footing, risks of overheating are a clear concern, and the Central Bank governor stated that the pace of growth has become slightly worrisome. While the strong krona hurts fisheries, it also makes tourism pricier for foreign visitors which should lead to lower prices by reducing demand.

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