Go to search feature Go to content

Nordic Outlook November 2021

For a long time, the economic recovery went much faster than expected. But this autumn the situation took a turn for the worse. Old problems have lingered, and new ones have emerged. Although the recovery is continuing after a sharp economic downturn early in the pandemic, numerous and difficult speed bumps remain.

 

Introduction

A tug-of-war is currently under way in the world economy. On the one hand, we have strong demand, solid growth and improved labour markets. On the other hand, there are major supply side problems, clear bottlenecks and rampant inflation that seems unwilling to subside quickly. 

Recovery, with speed bumps

Markets

United States

The stimulus-driven recovery is showing signs of overheating. The labour supply is expected to increase as virus worries ease. Unexpectedly high, long-lasting inflation will still cause the Fed to begin a series of rate hikes in September 2022. 

The euro area

Transport disruptions and component shortages are among short-term headwinds for industry. High energy prices will curb household purchasing power for some months. Inflation will fall in 2022. ECB key rates will be unchanged.

China

Risks to Chinese growth are deepening. Aside from domestic troubles in the credit and real estate markets, there is an energy crisis. Zero tolerance of COVID-19 is creating continued problems for both domestic supply and global value chains.

The United Kingdom

Brexit-related challenges and high energy prices are dampening economic growth. Inflation will be above target throughout our forecast period, and the Bank of England will hike its key interest rate several times, starting early in 2022.

Theme COP 26

From 31 October to 13 November, world leaders met at the United Nations Climate Change Conference (COP26) in Glasgow, Scotland. Their main purpose was to review the progress that countries have made on their pledges to help the world meet the target of the 2015 Paris Agreement.

Analysis of the climate negotiations in Glasgow

Theme: The labour market

Unemployment has already fallen close to prepandemic levels in many countries. Meanwhile the share of businesses having difficulty recruiting employees has rapidly increased.

The problems could threaten the recovery

Theme: China

Near-term downside risks to China’s growth are deepening. Aside from persistently lower lending growth, a combination of shocks will slow GDP growth to 8.2 per cent in 2021 and further to 5.2 per cent in 2022.

Growth is taking a back seat to structural reforms

Theme: Fossil fuels on fire

Falling investments during the COVID-19 pandemic and a rapid rebound in demand have sent coal and gas prices soaring this year. The situation has been further worsened by fears of a cold winter, which have resulted in significant hoarding – thus increasing the competition between Asia and Europe for coal and gas supplies.

Coal and gas prices at unprecedented levels

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.