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Nordic Outlook January 2023

The United States and Europe are headed towards a mild recession in early 2023. The inflation outlook has improved, and the likelihood of a deep downturn has diminished, write SEB's economists in a new issue of Nordic Outlook. 

The economists’ introduction

We now head into 2023 and the economic drama of the past years is approaching an end. We still expect the global economy to slow down, but how bad will it get?

The West is headed towards a mild recession

The United States

The economy is decelerating but the Federal Reserve is holding off on declaring victory over inflation, the labour market remains strong and there is a lingering risk of wage-driven inflation. We expect GDP growth of 0.5 per cent.

Mild but sluggish recession as tight Fed policy bites

The Euro area

Inflation is past its peak but will remain relatively high. Combined with higher interest rates, this will lead to a mild recession in 2023. The European Central Bank will soon hike its deposit rate to 3.25 per cent, before cuts begin in 2024.

Despite economic resilience, a downturn is imminent

China

China is focusing on economic recovery. GDP will increase by 5.5 percent this year. The strict Covid-policy has been dismantled faster than anticipated. We are revising our 2023 CPI inflation forecast upwards to 3.0 percent.

Policy pendulum swings towards growth

Sweden

We expect strong economic resilience to turn into a 1.2 percent GDP decline this year. Downside risks are mainly due to problems in residential construction. Increased fiscal stimulus represents upside opportunities.

Recession is finally arriving

Fading energy crisis

Prices of oil, coal and natural gas in the EU have fallen sharply, but the global fossil fuel market will still be tight. We expect lower natural gas prices, but higher oil prices this year as China reopens and oil supply from Russia is curbed.

Smaller risks, but still a tight market

US climate policy

The IRA – a historic, generous American climate package which has obvious industrial and trade policy elements – is pressuring the European Union to quickly agree on a policy that both prevents an industrial flight from the EU and preserves vital transatlantic relations.

Read more about US climate policy

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.

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