OSLO/STOCKHOLM/COPENHAGEN (Reuters) – The Danish, Swedish and Norwegian economies face meager growth prospects this year and next as a slowdown that started in 2019 takes hold, a Reuters poll showed.
The Scandinavian trio is well prepared to withstand a downturn, with low public debts and balance of payments surpluses, economists noted, but the countries’ wealth is also built on exports and thus vulnerable to cutbacks in global demand.
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“We cannot live in isolation from the rest of the world, so when the rest of the world slows down, it will hit Scandinavia as well,” Nordea chief analyst Jan Stoerup Nielsen said.
Norway is expected to perform best in 2020 with an estimated growth of 1.8%, down from 2.5% last year, while Denmark comes second, slowing to 1.5% from 2.0%, the Jan. 9-15 poll predicted.
Sweden, the largest of the three economies, will meanwhile be stuck at 1.2%, matching a six-year low set in 2019, according to the poll.
“We are in the early stages of a slowdown which started last year,” SEB economist Olle Holmgren said of the Swedish economy, pointing to softer developments in Asia and Europe for explanation.
“If you look at the indicators, they have actually got weaker during the year so in the short term, we believe that things will remain pretty weak,” Holmgren said.
Still, a recession was not a likely outcome for Sweden, he added, even as the central bank last month raised its key policy interest rate.
The move to a rate of zero percent allowed the Riksbank to leave behind five years of negative borrowing costs, but neither hikes nor cuts were likely for the foreseeable future, SEB’s Holmgren said.
In Norway, the central bank has raised interest rates four times since September 2018, but policy is now expected to remain on hold for at least the next 18 months as oil industry investment peaks, a majority of economists said.
Despite any softness, Denmark, Sweden and Norway are all ranked among the top-12 OECD member nations as measured by per-capita GDP.
“Compared to many other places in the world, we just look solid. We can also see that in our bond markets – when it really gets bad, it is the Nordic countries that investors are looking toward,” Nordea’s Stoerup Nielsen said.
(Reporting by Terje Solsvik in Oslo, Simon Johnson in Stockholm and Nikolaj Skydsgaard in Copenhagen; Polling by Sarmista Sen in Bengaluru; Editing by Alex Richardson)