The Nordics have been resilient and proved economically stable in recent years, despite the Covid-19 pandemic, and now, geopolitical instabilities in Europe and inflation affects consumer behavior. Yet, the Nordics are still strong compared to similar markets.

The Nordic countries have a strong starting point heading into the coming year. Compared to most other European countries, they have been less damaged during the Covid crisis, and have recovered more quickly. Government finances are generally in good shape, and measures to help households and businesses cope with inflation are comparatively modest. If all goes well, a mild recession should be enough to rebalance the economy and we can move on afterward with somewhat higher unemployment but economies that are not seriously damaged. Overall, the Nordic economies have been resilient and done better than expected in recent years, consequently, the Nordics are in a good position looking into 2023.

When investigating the Nordic economies and comparing them to other countries in Europe, it becomes clear that the Nordics are in a good position. The GDP per capita (PPP) is well above average in the EU, as seen in the table below:

Denmark	Sweden	Norway	Finland	EU Average
64,651	59,324	79,201	55,013	48,480

Table 1: GDP per capita, PPP (current international $) (International Comparison Program, World Bank | World Development Indicators database, World Bank | Eurostat-OECD PPP Programme)

Denmark

We saw a slight growth of 0.3% in Denmark’s GDP in Q3 of 2022 (SEB, 2023), and recently, the GDP indicator suggests a significant growth of 1.1% in Q4 for 2022, when adjusted for inflation and seasonality (Statistics Denmark, 2023). Consequently, 2022 had been a year with overall growth in Denmark’s GDP. The economy is expected to cool in 2023, yet Denmark is still set to see minor growth in GDP of 0.1% but is expected to recover again in 2024 (OECD, 2022a).

Rising energy prices held back consumer spending, however, Denmark’s been doing better than expected. According to SEB (2023), consumers’ spending power is challenged by inflation, but it is expected to become a growth driver in H2 2023 with a 0.5% growth the whole year.

Unemployment rates continue to be at a record low (Statistics Denmark, 2023), benefitting the Danish economy overall. In 2022, the Ministry of Finance’s (2022a) own evaluation proposes that the unemployment rate will follow the deceleration of the Danish economy. This is supported by AE (2023) and SEB (2023), which expect a small increase in unemployment rates. However, the unemployment rates are still anticipated to be very low compared to the recent decade. Thus, despite an expected increase in unemployment rates, the Danish labor market is strong, benefitting the Danish economy.

In the fall of 2022, Denmark got a broad-based government, and their economic policies are focused on stabilizing the Danish economy, and so far, they have been successful, just as their predecessor, as Denmark has done very well in recent years compared to other, European countries. Consequently, the Danish economy is very well prepared and still resilient to handle any challenges in the coming years.

Sweden

In recent years, Sweden has shown impressive economic resilience (SEB, 2023). In the last quarter of 2022, the growth in GDP was above expected (SEB, 2023). Back in November, SEB anticipated that the difficulties Sweden was facing would negatively affect GDP in 2023. While that is still the case, they recently reevaluated and now expect a minor decline in GDP of 1.2% in Sweden. Consequently, Sweden is doing better than expected.

Consumer spending will be one of the main drivers of the expected 2023 decline in GDP, as disposable incomes will decrease by 4% total in 2022 and 2023. As disposable incomes are expected to decrease, consumer spending is also anticipated to decline by 1.7%, which is less than disposable incomes (SEB, 2023). This indicates a willingness from the Swedish population to hold on to their consumer behavior.

The labor market appears more resilient today than during previous crises in Sweden (SEB, 2023), which, of course, is positive for the Swedish economy. However, rising unemployment is expected in 2023, because GDP is starting to decline, however, it will not be right away. As SEB now expects a moderate fall by just 1.5% in employment.

Sweden got a new government comprised of the Moderate Party, the Christian Democrats, and the Liberal Party in the fall of 2022. This government has set a clear path for its economic policy to strengthen growth and ease the economic pressure on the population. Furthermore, they plan to combat unemployment and support Swedish households and businesses (Government of Sweden, 2022). SEB (2023) expects the central government budget to be in balance in the coming period.

Norway

Economic indicators in Norway point to a recession ahead, however, the growth in GDP has held up better than feared with an increase in GDP for Mainland Norway of 3.8% from 2021 to 2022 (Statistics Norway, 2023). It is expected that Norway will face a minor decline in GDP in the first half of 2023 while experiencing an increase of 3.5% in the second half (SEB, 2023). Inflation is expected to peak in early 2023, affecting consumption and the general economic situation.

Consumer spending has been surprisingly high considering the inflation and interest rate hikes (SEB, 2023; Statistics Norway, 2023). This may be caused by employment growth, solid savings, and a desire to return to normality after the Covid-19 pandemic (Statistics Norway, 2023). However, weaker spending in 2023 is expected, especially in early 2023, which is in line with the anticipated decline in GDP in the first half of 2023.

While unemployment rates have been low in Norway in recent years, and the labor market is strong in 2022 (Statistics Norway, 2023), the unemployment rates are expected to rise from 2023 to 2024 from 1.6% to 2.6% (SEB, 2023). This will negatively impact the Norwegian economy; however, household savings may continue to uphold consumption and keep the economy going forward, which to some extent is seen in the expected growth in GDP for 2023 overall.

As seen in other Nordic countries, Norway’s current economic policies are put in place to safeguard household finances by bringing inflation under control. Furthermore, the Norwegian government is planning a redistribution of taxes to benefit the nation, consequently, individuals with the highest income will contribute more, while ordinary consumers will get a tax relief (Norwegian Ministry of Finance, 2022b).

Finland

Finland’s economy rapidly recovered from the Covid-19 pandemic, showing the stability of the economy (OECD, 2022b). However, the economy now faces challenges with increasing inflation and a worsening general economic outlook in Europe. This has and will influence Finland’s economy, however, 2022 showed a strong GDP increase of 2.0%. The GDP is expected to decline marginally in 2023, by 0.3%, and Finland will see growth in 2024 by 1.4% (SEB, 2023). Consequently, the economy will be back to speed in 2024 (OECD, 2022b).

Consumer spending in Finland has been facing challenges due to inflation, however, it has not stopped the population from increasing their consumption, which affects the economy positively (SEB, 2023). In early 2023, consumer confidence rose (Statistics Finland, 2023b), but is still weak, affecting consumer spending now and in the coming months. That said, if consumer confidence continues to rise, it will positively affect the economy.

As of December 2022, the unemployment rate was 6.7%, which is one of the lowest points in recent years (Statistics Finland, 2023a). Consequently, the labor market has been in good health in recent years, however, the unemployment rate is expected to increase to 7.1% in 2023 (SEB, 2023). Despite this forecast, consumers’ expectations of the development of the general unemployment situation in Finland improved in January (Statistics Finland, 2023b).

Ahead of the parliamentary elections in April, the government has been trying to combat the increasing inflation. This is done through the Sustainable Growth Programme for Finland, which is set to boost reforms and investments. Recently, Finland’s share of financial aid decreased because the economy recovered better than anticipated (Finnish Ministry of Finance, 2023). This indicates the government’s policies have been effective at combatting the challenges caused by inflation, etc., consequently showing a prosperous future in the years to come.

References

AE. (2023, February 14). Dansk økonomi er bundsolid på tærsklen til afmatning. Dansk Økonomi Er Bundsolid På Tærsklen Til Afmatning. https://www.ae.dk/prognose/2023-02-dansk-oekonomi-er-bundsolid-paa-taersklen-til-afmatning

Statistics Denmark. (2023). Fremgang i industrien bag kraftig BNP-stigning. https://www.dst.dk/da/Statistik/nyheder-analyser-publ/nyt/NytHtml?cid=40678

Finnish Ministry of Finance. (2023, January 26). Finland submits updated recovery plan to the European Union – Valtiovarainministeriö. https://vm.fi/en/-/finland-submits-updated-recovery-plan-to-the-european-union

Government of Sweden. (2022). The Government’s political priorities. Regeringen och Regeringskansliet. https://www.government.se/articles/2022/11/the-governments-political-priorities/

Danish Ministry of Finance. (2022a). Økonomisk Redegørelse.

Norwegian Ministry of Finance. (2022b, October 6). A budget for security and fair distribution. regjeringen.no. https://www.regjeringen.no/en/aktuelt/a-budget-for-security-and-fair-distribution/id2930559/

OECD. (2022a). OECD Economic Outlook November 2022: Denmark.

OECD. (2022b, December 15). OECD Economic Surveys: Finland 2022. OECD. https://doi.org/10.1787/516252A7-EN

SEB. (2023). Nordic Outlook: January 2023. https://mb.cision.com/Main/4324/3701844/1797787.pdf

Statistics Denmark. (2023). Labour market status of the population. https://www.dst.dk/en/Statistik/emner/arbejde-og-indkomst/befolkningens-arbejdsmarkedsstatus

Statistics Finland. (2023a). Unemployment rate, Population by labour force status. https://pxdata.stat.fi/PxWeb/pxweb/en/StatFin/StatFin__tyti/statfin_tyti_pxt_135y.px/chart/chartViewLine/

Statistics Finland. (2023b, January 30). Consumer confidence rose but was still very weak in January 2023. https://stat.fi/en/publication/cl7q21hiv3cor0bvyq0eeooun

Statistics Norway. (2023, February 15). Norwegian economy in 2022: High growth, high prices. https://www.ssb.no/en/nasjonalregnskap-og-konjunkturer/nasjonalregnskap/statistikk/nasjonalregnskap/artikler/norwegian-economy-in-2022-high-growth-high-prices