Nordic Economies: Nordic Economies Outlook September 2017
August 30, 2017
Denmark: Preliminary data suggests that the Danish economy grew a healthy 0.5% in quarterly terms, bringing the growth rate for the first half of the year up to 2.6% in annual terms. Adding to the good news, business confidence in July reached the highest level in over three years as expectations for production improved, while consumer confidence remained firmly entrenched above the crucial zero-point mark in August, where it has been since the outset of the year. The second quarter also saw a mild increase in Denmark’s already-large current account surplus, which continues to cause the local currency to strengthen. The high current account surplus simultaneously reflects the low level of domestic fixed investment and high pension savings, which could act as a drag on domestic demand. Indicators signal that the economy remains healthy, despite evolving risks.
Finland:The Finnish economy delivered a disappointing GDP result in Q2 after Q1’s strong print had stoked hopes of a more sustainable and meaningful recovery. According to a preliminary estimate released by the Statistical Institute on 15 August, GDP growth slowed significantly on an annual basis in Q2 and actually contracted on a quarterly basis. A detailed breakdown of Q2’s performance will be released on 1 September and should reveal whether the weakness was a one-off occurrence or signals longer-term issues. Nevertheless, the slowdown is only expected to be short-lived when looking at hard and soft data. Both businesses and consumers have been growing increasingly optimistic as the year has worn on, while export growth and industrial production have remained relatively healthy.
Head on over to our Nordic Economies page for more recent economic news on the region.
Norway: Norway’s economic story remains largely unchanged as subdued oil prices continue to dampen oil activity, while the mainland economy is benefiting from lower unemployment and improving manufacturing output. In the political arena, the country is facing a parliamentary election on 11 September to elect the upcoming prime minister. A victory for the left-leaning coalition would bring higher taxes for wealthy Norwegians, while the Conservative Party stands for targeted tax cuts. While the Labour Party is leading in the polls, the ruling Conservative Party has made considerable gains on the back of a strengthening economy. In fact, in most recent surveys, the Conservative Party and its allies are faring slightly better than the left bloc. In any case, polls point to a highly-fragmented parliament, and political wrestling will be needed to form a stable government.
Sweden: Sweden enjoyed the fastest pace of economic growth since 2010 in the second quarter. The economy grew primarily on the back of increased household consumption and fixed investment, and industrial production recorded a second consecutive monthly expansion in June. However, some headwinds lie ahead, chiefly due to current political events. Following last month’s news of a data breach in which details on nearly every citizen were leaked, the cabinet was reshuffled, and two ministers have been replaced. The opposition is not satisfied, however, and is eager for the government to tumble so that elections scheduled for September 2018 can be moved up. The political turmoil could make it difficult for the government to pass meaningful reforms to tackle pressing issues such as an overheating housing market and the integration of refugees.
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.