Economic outlook, December 2025

December 26th 2025

This last economic outlook for the Nordics and Baltics in 2025 reflects ongoing resilience and modest growth. Household consumption is expected to increase even further in the coming year, due to lower inflation and rising real incomes. Most countries have low unemployment rates, which also benefits both the national economies as well as the private consumption.

Simultaneously, global uncertainties such as trade tensions and geopolitical risks continue to pose potential challenges.

Let us take a more detailed look at each country.

Denmark

Denmark benefits from domestic demand lifting growth. SEB projects GDP growth of 1.5 per cent in 2025, 2.5 per cent in 2026, and 2.8 per cent in 2027. Growth has been driven largely by the pharmaceutical industry and exports. Even though expectations for GDP growth have been increased this year and in 2026 by Danske Bank, indicating that the Danish economy remains strong. That said, it is clear that the pharmaceutical industry plays a significant role in the growth of the Danish economy.

Consumer spending: Despite tailwinds to household finances and a solid labour market, private consumption is very low relative to incomes. Consumption is set to increase, in line with incomes, but so far it is low due to poor consumer confidence. That is interesting, since the households are becoming healthier. Wages are increasing, unemployment remains low, so there is a basis for increased consumer spending in the coming months.

Labour market: Denmark’s labour market remains historically tight with low unemployment. Continued strength in employment and wages supports private consumption, although a slow labour market recovery could delay the demand pick-up. Unemployment rate is anticipated to be stable around 3.0 per cent in 2026 and 2027.

Sweden

Latest data and the SEB report signal that Sweden’s economy is finally showing some signs of higher growth. SEB projects GDP growth of 1.3 per cent in 2025, followed by 2.8 per cent in 2026 and 2.9 per cent in 2027, illustrating an upturn from earlier stagnation. Danske Bank has revised its 2025 and 2026 growth forecast as well, underlining the strengthening momentum. Overall, the Swedish economy is showing a stronger performance.

Consumer spending: Despite tailwinds to household finances and a solid labour market, private consumption in Sweden remains low relative to incomes. However, household consumption is anticipated to grow more rapidly in 2026 and 2027. Real household incomes are improving, supported by expansionary fiscal policy, which should lift consumption and housing markets next year. Inflation has declined and is around target, heading slightly below in 2026 per SEB. That said, Danske Bank still argues that despite lower inflation, the Swedish households will face higher prices.

Labour market: The labour market is strengthening. Unemployment has decreased, and wage growth is expected to stabilize at 3.5 per cent, helping to support consumption despite overall demand being subdued. Continued improvement in employment and real wages is anticipated. However, according to SEB, the real turnaround will not happen until 2026.

Norway

Norway’s growth rotation is underway. SEB projects GDP growth of 0.7 per cent in 2025, 1.2 per cent in 2026, and 0.6 per cent in 2027. While Danske Bank’s GDP growth projections are slightly higher, we do not see revisions pointing towards further increases. The rotation is driven by residential investment, mainland private capital expenditure and public demand. Growth has slowed over the summer, indicating a gradual transition to a steady pace.

Consumer spending: Consumer spending appears weak relative to the push from high wage increases: households face headwinds from inflation eating into real incomes, though high wages provide some support. A pick-up in consumption hinges on a continued improvement in labour incomes and confidence.

Labour market: The labour market shows mixed signals: slower growth in employment and a modest rise in unemployment are contrasted by elevated vacancy rates, suggesting labour demand remains strong. Overall unemployment remains low and broadly stable at 2.2 per cent. In 2026 and 2027, Danske Bank anticipates the unemployment rate to remain at 2.3 per cent, representing a minor increase, but not a severe one.

Finland

Finland continues to exhibit persistent weakness with SEB projecting GDP growth of 0.0 per cent in 2025, 0.8 per cent in 2026 and 1.5 per cent in 2027. Although Dansk Bank’s forecast is slightly more positive with 0.3 per cent in 2025, 1.5 per cent in 2026, and 1.8 per cent in 2027, it remains relatively bleek. However, signs of recovery are emerging: new industrial orders, house market activity, and mortgage drawdowns are on the rise, which suggests that production and residential investment might soon recover. Consequently, economic growth is set to pick up in 2026.

Consumer spending: Consumption-driven upturn is expected, but not as strong as in other Nordic peers. Real wages are improving gradually, helping support spending, though overall confidence remains cautious. It is clear that the relatively high unemployment rate negatively affects private consumption. Inflation remains low, supporting consumer spending.

Labour market: The labour market should improve slowly, with the unemployment rate staying relatively high. Danske Bank notes that the unemployment rate will decrease to 9.3 per cent in 2026 and to 8.7 per cent in 2027, which evidently is higher than in other Nordic countries.

Lithuania

Lithuania appears best positioned in the Baltics: strong domestic demand and exports set it apart, though the anticipated jump in household consumption is still awaited. Projected growth is higher than for its Baltic peers, with 2.5 per cent GDP growth in 2025, 3.2 per cent in 2026, and 2.1 per cent in 2027

Consumer spending: Consumption has yet to accelerate despite solid wage increases. Consumer confidence in Lithuania is among the highest in the EU, so there is an optimistic outlook for 2026, according to SEB. Wage growth remains significant; however, it is expected to decline slightly in the coming years to 7.6 per cent.

Labour market: Unemployment is gradually stabilizing, despite a slight increase in 2025. Labour market conditions remain supportive.

Latvia

Latvia’s recovery is fuelled by capital spending: SEB forecasts modest GDP growth with investment rising sharply. Projections show 1.5 per cent in 2025, 1.9 per cent in 2026 and finally 2.3 per cent in 2027.

Consumer spending: Household consumption in Latvia has been weaker than expected. Inflation has been elevated and is gradually easing, while the upside for consumption remains limited absent a broader income or confidence boost. That said, consumption is picking up, supported by real wage growth and improvement in employment numbers, and a decline in inflation.

Labour market: The labour market shows gradual improvement: unemployment rate is declining, from about 6.9 per cent in 2024 to 6.8 per cent in 2025. SEB anticipates the unemployment rate to decline even further in 2026 and 2027, due to increased economic activity

Estonia

Recovery in a high-inflation environment: Estonia’s economy is showing slow positive momentum after contraction. SEB projects GDP growth of 1.9 per cent in 2025, 2.7 per cent in 2026 and 2.3 per cent in 2027. Growth is modest, but the trajectory is upward. Overall, GDP growth is set to broaden in 2026, which should be regarded as positive.

Consumer spending: Consumer spending is gradually improving despite high and persistent inflation. A resilient labour market and external demand should strengthen a gradual pick-up in consumption. Wage growth is expected to remain stable for the next two years, which should benefit household consumption, especially if inflation declines once again.

Labour market: Unemployment is high, though slowly falling, from around 7.6 per cent to 6.7 per cent in 2027. Thus, the expectation is that unemployment will continue its decline, benefiting the households and the economy as a whole.

Concluding remarks

There is steady progression in the Nordics and Baltic economies. Resilient labour markets and easing inflation support growth that hovers near potential, with room for consumer spending to accelerate in some places. The Baltics appear to be gathering momentum on the back of investment and consumption shifts, whereas the Nordics demonstrate differentiated recoveries – Sweden, Denmark, and Norway lean into modest upturns while Finland embarks on stabilisation.