Economic Outlook: Nordics slowing down but still safe havens
The latest Economic Outlook from Nordea, released on Tuesday, concludes that like for the Eurozone, recession has also hit the Nordic economies. Consequently the growth estimates for the region has been lowered. However, the Nordics will maintain their safe-haven status in the financial markets.
Helge J. Pedersen, Nordea’s Global Chief Economist:
What is the outlook for the Nordics?
- The Nordic countries with the exception of Norway are hit by the global slowdown. Generally spoken both households and businesses are cautious about the future and therefore reluctant to increase their spending. A weak domestic demand might turn out to be a tough challenge for the growth outlook for 2013. Especially developments in the labor markets may be crucial in this context. Fortunately, due to sound public finances in the Nordic countries, they will continue to keep the position as safe havens in the financial markets. This ensures a low interest rate and thus, helps the development in the housing markets. Experience from Denmark, where the housing bubble burst in the mid 2000:s, clearly shows how important a parameter like housing prices are for household consumption decisions and the financial stability of a country.
How will the situation in Europe effect the development?
- Europe is the most important export market for the Nordic countries. Therefore it is crucial for the growth outlook, that the recession in the Eurozone will be mild and short-lived. Especially the Swedish and Finnish export sector is highly exposed to changes in the international business cycle. Denmark has a somewhat broader export base and therefore less vulnerable export sector and for Norway, it’s especially the global oil demand, which plays the decisive role when it comes to the outlook for exports.
What about the effects from outside Europe?
- At present, the outlook for the U.S. and China is certainly brighter than for the Eurozone. The economic growth of the two super powers are crucial to the development of world trade and there is hope that the Eurozone economies also can get their export boosted if growth increases in the rest of the world. This could be an important game changer also for the Nordics who then would see both direct and indirect improvements in their short term growth prospects. However, it is also crucial for the Nordic companies, that they look more to the rapid growing emerging markets through their export strategy.