Swedish and Danish growth prospects for 2018 have brightened in recent months, following last year’s forecast-beating economic performance in Scandinavia, a Reuters poll of economists showed on Thursday.
Sweden is expected to remain the top performer in 2018, but its lead over neighbouring Denmark and Norway will become smaller in 2019, according to the survey of 24 banks and brokerages.
In 2017, all three countries grew more rapidly than it had been forecast, as global economic strength combined with ultra-loose domestic monetary policies to spur activity.
“We’re in a synchronised international upswing that benefits the region,” Nordea Markets economist Joachim Bernhardsen said, adding export-driven Scandinavian economies are well positioned to take advantage.
The Swedish economy, the largest of the three, is now expected to grow 2.7 per cent in 2018. That is better than the 2.5 per cent predicted in October, although down from the estimated 2.8 per cent expansion in 2017.
Both Denmark and Norway’s economies are expected to grow 2.0 per cent in 2018. For Denmark, that was an increase from 1.8 per cent since October; for Norway, a cut from 2.1 per cent.
“In the case of Norway, it looks like the upswing came faster than most people had anticipated,” DNB Markets economist Jeanette Stroem Fjaere said, adding renewed optimism in the country’s oil industry had shown greater impact already in 2017.
“The timing of a shift like this can be difficult to forecast,” she said.
A near-absence of inflation has been a major cause of concern at the region’s central banks, triggering rate cuts, quantitative easing and other measures, but consumer prices are now expected to accelerate in all three countries from 2018 to 2019.
Unemployment was seen declining across Scandinavia in both 2018 and 2019.
Sweden’s economy grew an estimated 2.8 per cent last year, better than the 2.4 per cent expected a year ago. Norway’s grew 1.9 per cent instead of the 1.5 per cent forecast a year ago. The Danish economy expanded 2.1 per cent, beating a forecast of 1.5 per cent, according to the poll.
Economists cautioned that falling housing prices in Norway and Sweden pose a potential risk to growth, but only in the unlikely case they cause private consumption to slow.
In Norway, Finance Minister Siv Jensen downplayed the risk.
“The probability that a further fall in housing prices will trigger an economic downturn is very small,” she told a business conference on Wednesday.