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Nordic Outlook May 2022

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The Ukraine war is putting pressure on the global economy. Widespread commodity price upturns are fuelling inflation further. Despite a poorer growth outlook, central banks must prioritise their fight against inflation, thus squeezing households and businesses. We have lowered our 2022 global GDP growth forecast by more than one percentage point. Due to fiscal stimulus, pent-up demand, strong private balance sheets and eventual easing of global supply chains, a soft landing is still the most likely outcome. 

 

Markets

Sweden

Consumption is slowing. Despite Sweden’s favourable industrial structure, growth will fall below trend in 2022-23. The Riksbank faces a tough balancing act; high home prices make the economy interest rate-sensitive. Pay hikes will accelerate. 

The euro area

The Ukraine war is leading to increased euro area investments in defence and faster energy transition. High inflation will erode purchasing power, and growth will slow sharply. The ECB will hike its key rate from July, but more sedately than the Fed. 

USA

An overheated labour market and resilient demand are pushing the Fed to hike the key interest rate quickly. The Ukraine war and China’s COVID lockdowns are increasing growth and inflation risks, but our main US scenario is still a soft landing. 

China

Tough COVID restrictions will hamper growth and contribute to higher inflation. Yet monetary policy support has been modest, and fiscal policymakers must do the heavy lifting. We are adjusting our GDP growth forecast somewhat lower.

Theme: The changing Baltics

It is easy to assume that Russia’s neighbours Estonia, Latvia and Lithuania are among countries losing the most from the situation, but the economic links between the Baltics and Russia are less important than many people believe. 

Living standards are now on par with southern Europe

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.