The global economy continues to experience modest growth, with Europe expected to play a significant role in driving this trend. According to Helge Pedersen, Nordea Group Chief Economist, "there are prospects of rate cuts in most countries, but the persistently high inflation requires very careful timing and dosage of monetary policy easing."
In the Nordic region, Norway and Denmark have maintained solid economic footing over recent years. Meanwhile, Sweden and Finland are beginning to stabilize after periods of weak economic activity.
Denmark's economy is growing at a faster pace than that of the Euro-area. Low inflation is enhancing consumer purchasing power, and Nordea anticipates quarterly rate cuts until the end of 2025. This monetary policy is expected to stimulate economic activity further and contribute to rising home prices. Additionally, strong growth in the pharmaceutical industry is boosting economic activity.
Finland has seen its first signs of growth in two years during the first half of 2024. Lower interest rates and recovering consumer purchasing power are projected to help Finland return to a growth trajectory. However, government spending cuts may slow down recovery but are deemed necessary for controlling public debt growth.
Norway's economy is currently experiencing an upswing driven by high wage growth, lower inflation, and stable interest rates which enhance household purchasing power. The NOK exchange rate might benefit from international rate cuts, potentially leading Norges Bank to cautiously reduce rates by 2025.
Swedish households have overcome their worst period, setting conditions for an economic recovery starting in the second half of 2024. Inflation is anticipated to remain below but close to the 2% target. Despite imminent rapid rate cuts, it is expected that the Riksbank’s policy rate will stay significantly higher than pre-pandemic levels.
Nordea Markets provides real GDP growth forecasts for various regions: globally at 3.2% in 2023 increasing slightly each year through 2026; Denmark at 2.5% in 2023 declining slightly before stabilizing; Finland showing negative growth in 2023 improving into positive territory by 2025; Norway maintaining steady growth; and Sweden rebounding from negative figures towards stronger performance by 2026.