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Nordic Outlook August 2022

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Because of accelerating inflation and rapid key interest rate hikes, the global economic outlook is deteriorating. We are adjusting our GDP forecasts sharply lower, especially for 2023, and expect GDP growth of only 0.9 per cent in advanced economies (the 38 OECD countries) – down from 2.3 per cent in our May forecast. Swedish GDP growth will be 0.0 per cent next year, yet the Riksbank will speed up its inflation-fighting pace and the repo rate will peak at 2.25 per cent early in 2023. Swedish households are being squeezed by falling real incomes, rising prices and doubled interest expenditures, and home prices will fall by 15-20 per cent.

The economists’ introduction

Forecasts are more uncertain than normal, but there will be a sharp economic slowdown during 2023 and a recession – at least a mild one – will be hard to avoid.

Slower growth as economic headwinds intensify

Markets

Sweden

Falling real incomes, rising interest rates and elevated housing costs are lowering consumption, growth and home prices. The key rate will reach 2.25 per cent in April 2023; rate cuts will begin in 2024. 

The euro area

The economy has been resilient so far this year but falling consumption due to the energy crisis will trigger a mild recession. GDP will grow only 0.2 per cent in 2023. The ECB will quickly hike its key rate, but economic weakness will limit the upturn.

USA

Rapid key interest rate hikes and high inflation are curtailing home construction, investments and private consumption, but the slowdown will be mild in a historical perspective. We expect the Fed to cut its key rate during the latter part of 2023.

China

Strict COVID policy and problems in the property sector are causing growth headwinds. GDP will grow by only 3.5 per cent this year. Fiscal policy will become more expansionary, while the People’s Bank of China remains more cautious. 

Theme: The war in Ukraine

In the long term, the big loser of the war in Ukraine will be Russia and the Russian economy, which will stagnate under Western sanctions. In the short term, however, the biggest cost will be borne by Ukraine. 

The economic effects of a lengthy war

Theme: Sweden’s election

Whatever the outcome, the 11 September election will probably be followed by lengthy negotiations before a new government is in place. 

Tough negotiations to form a government

What is Nordic Outlook report?

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.