Nordic Economies Economic Outlook March 2017

Economic Snapshot for the Nordic Economies

Nordic Economies: Economic Snapshot for the Nordic Economies

March 1, 2017

DenmarkGrowth in 2017 should see a moderate acceleration after last year’s subdued expansion due to weak export growth, as oil shipments, close to 7% of Denmark’s merchandise exports, were hampered by low energy prices. Latest signals from the domestic economy suggest that private consumption continues to drive growth on the back of rising disposable income, cheap credit and a declining unemployment rate, which hit an eight-year low in 2016. Against a backdrop of positive conditions for household spending, consumer confidence rose to a six-month high in February. On the other hand, business confidence is lingering at negative levels in the face of mounting political uncertainty in Europe.

FinlandFinland’s economy grew at a quicker pace in 2016 according to preliminary estimates, overshooting analysts’ expectations of a softer recovery. A detailed breakdown, set to be released in March, is expected to show that domestic demand was the main driver of growth. Private consumption is likely to have been particularly dynamic, buoyed by low-borrowing costs and subdued inflation. The external sector likely was a drag on growth amidst the still downcast external environment. The positive sentiment seems to have carried over to Q1 2017, when consumer confidence reached a multi-year high in January despite a moderating labor market.

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NorwayNorway’s total GDP and mainland GDP both accelerated in sequential terms in Q4, showing timid signs of positive momentum. The improvement in economic activity was supported by stronger growth in private consumption, thanks to easing inflation, and a return of growth in oil-sector-related fixed investment as the outlook for the petroleum industry has brightened. Nonetheless, for 2016 as a whole, the economy decelerated to a three-year low. This year, the government plans to further tap the country’s USD 900 billion wealth fund in order to plug the government’s budget deficit following the first historic outflow last year. Meanwhile, exports recorded over 20% of annual growth in January as a result of the rise in crude prices, providing additional impetus to the economy.

SwedenThe country is set to close 2016 on a high note. Growth in domestic demand was buttressed by solid government consumption and private consumption, which benefitted from low interest rates, higher real disposable income and a tightening labor market. The positive trend is expected to carry over this year on the back of an accommodative monetary policy, possible wage hikes and high optimism in the economy, as suggested by the most recent surveys. Manufacturing sentiment reached a multi-year high in January as a still-weak krona is boosting output and growth in exports. The economic tendency survey eased marginally in February though the indicator continues to signal ongoing strength in the economy, particularly in retail and construction. 

IcelandIceland’s economy accelerated last year to levels last seen before the 2008–2011 Icelandic financial crisis. Robust growth was fueled by surging tourism, higher real wages and low unemployment. The strong rise in fixed investment was driven by upbeat economic sentiment spilling over from the tourism boom, which also caused the unemployment rate to decline to pre-crisis levels. According to a recent survey among businesses, finding staff has become increasingly difficult, despite a higher number of workers coming from abroad, which threatens to erode the country’s competitiveness.

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