The global economy is currently experiencing significant uncertainty due to President Trump's tariff war with various countries. Despite these challenges, Nordea Group Chief Economist Helge Pedersen states, "We do not expect a global recession in our baseline scenario, and we believe that Europe, particularly the Nordic region, is well-positioned to weather the storm."
This resilience in the Nordic region is attributed to solid public finances and large surpluses on external balances, although Finland stands as an exception. The small and open economies of the Nordic countries have experience in navigating uncertain times, especially concerning foreign trade.
Denmark, known for its sensitivity to international developments due to its small open economy status, faces challenges from the trade war. However, Denmark is prepared for these global uncertainties with a substantial savings surplus, robust public finances, and a flexible labor market.
In Finland, budding economic growth may face setbacks from trade tariffs. While inflation and interest rates are boosting purchasing power, increased uncertainty could delay private consumption and investment. Although there is increased activity in the housing market, prices remain stagnant with oversupply in rentals continuing to deter new construction.
Norway's economic growth is on an upward trajectory driven by rising consumer spending and housing construction. A weak Norwegian krone benefits exports while global trade tensions are expected to have minimal impact on Norway’s economy. Low unemployment and high wage growth will likely keep inflation above target levels. Consequently, Norges Bank does not anticipate cutting rates soon.
Swedish households and businesses have been affected by global trade tensions; however, the impact on growth is expected to be limited. Sweden's gradual economic recovery continues under favorable conditions. While inflation might decrease next year, a stronger economic environment should reduce Riksbank’s need for easing monetary policy.
For more detailed insights into this analysis by Nordea Group economists, readers can access their Economic Outlook report online.