The global economy in a race against time
Head of Economic Forecasting Daniel Bergvall leads a discussion with Chief Economist Jens Magnusson on the key insights from the latest Nordic Outlook.
(In Swedish)
Nordic Outlook May 2026
What are the findings in the latest issue of Nordic Outlook? Our economists' give you in-depth theme articles and analysis of trends.
Geopolitical uncertainty, now with a focus on the conflict in the Middle East, and rising energy prices are weighing on growth prospects. The Strait of Hormuz needs to be reopened to avoid an escalation of the negative effects. While overall inflation is rising, the effects on core inflation and growth are uncertain; we do not foresee any repetition of the inflation shock of 2021–2022, and there are also counterforces supporting the economy. Central banks are awaiting the effects of the supply shock. The Fed implements a rate cut, but not until December, and the ECB makes a precautionary hike this summer. The Swedish GDP forecast for 2026 has been trimmed to 2.6 per cent from 3.0 per cent in January. We maintain our forecast of 2.9 per cent growth for 2027. With low inflationary pressure and resource utilisation, the Riksbank will not implement a hike until the end of 2027.
The global economy in a race against time
It was in the cards that 2026 would be another dramatic year for the world economy. Current times are unpredictable and, entering this year, we flagged a number of economic, political and geopolitical risks. Now, we know which one has had the greatest impact on the economy, at least so far – the conflict in the Middle East, which has plunged the world into an energy crisis that is the worst since at least the oil crises of the 1970s.
Theme: Energy – The world is living on borrowed time until the Strait of Hormuz is reopened
The Strait of Hormuz is actually too important to be closed, since it accounts for 20-30 per cent of the flows of a number of key commodities, yet it is closed. Elevated global oil inventories have so far cushioned the world from an outright energy crisis, but the world economy is living on borrowed time and the situation is deteriorating day by day. If the Strait of Hormuz is still closed in June or July, the risk of a full-scale crisis is significant.
Theme: Inflation – How big will the effects of rising energy prices be?
Rising oil prices quickly lead to higher inflation via increased fuel prices, but also risk pushing up core inflation via more generally rising production costs. However, current energy price increases are clearly lower than when the war in Ukraine began. Given that energy prices will fall back in line with the futures market, most of the evidence points to a modest effect on core inflation.
Theme: New strategic direction for the EU
Developments in many areas increase the risk of conflicting objectives in EU trade policy. In this context, the EU is striving to strike a balance between new trade agreements and openness on the one hand, and securing deliveries and production of strategic materials and raw materials on the other.
United States
The growth forecast is lowered only moderately. AI investment, productivity growth and fiscal policy are supporting the economy. Higher oil prices benefit the energy sector, but higher inflation is putting pressure on households. The Fed is proceeding cautiously with rate cuts.
Euro area
The war in the Middle East is slowing growth this year, but the power varies from one economy to another. The combination of low growth and high inflation will be difficult for the ECB, but we believe that inflation concerns will take over and that the ECB will raise interest rates in June.
China
The shift towards more pragmatic growth targets will result in gradually lower GDP. Fiscal policy is neutral and investment in the manufacturing industry is recovering. Monetary policy will remain stable pending greater clarity on the energy outlook.
Sweden
Growth has lost momentum, but underlying positive forces remain. Low inflation, a weak labour market and low resource utilisation cause the Riksbank to lie still for a long time; if the war in the Middle East causes energy prices to fall, an rate cut cannot be ruled out.
Makropodd about Nordic Outlook May 2026
In this edition of Makropodd, SEB’s chief economist Jens Magnusson and head of forecasting Daniel Bergvall discuss the first edition of the bank’s economic report for the year, Nordic Outlook.
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Our macroeconomic flagship report Nordic Outlook contains our economists' views on economic developments in the world. You will find key forecasts as well as an analysis of trends and political decisions that affect the world economy.
