Nordics: Growing tailwinds to support a cyclical recovery

We expect growth across the Nordic economies to pick up in the near term, with quarterly growth in Sweden and Norway among the highest across advanced economies by late next year, driven by cyclical tailwinds and policy easing. Key downside risks relate to a larger weakening of the labour market than we expect and households saving rather than spending their income gains.

What you will learn:

• The key growth drivers are real income gains supporting consumption, improved confidence across sectors, and lower interest rates leading to higher investment. Monetary policy is becoming less restrictive, while fiscal policy will be expansionary in Sweden and Norway. The policy support together with cyclical tailwinds will support stronger growth next year.
• High inflation in the Nordics is over with the headline rate well below 2% for several months in all but Norway. Policy easing is well underway in Sweden and will be the fastest among all advanced economies. But Norges Bank remains focused on the last inflation mile, with a first rate cut in Q1 2025.
• We think the outlook for Nordic currencies will be determined by external events. Over recent years, these currencies flagged more on negative global news and appreciated less on good news. We expect them to rise over the medium term, although geopolitics and new supply side shocks present key downside risks.