There are several signs across the Nordics that inflation momentum is falling, and the economies have remained resilient for the most part. There are concerns about the weak currency in Sweden, however, the economy remains well. Overall, government finances are in good shape and have performed better than anticipated in the first half of 2023.
There might be difficulties in the coming months, as growth slows, however, across the Nordics, we see stable and low unemployment rates that help stabilize the economies. While consumer spending mostly has suffered in the past months, consumer confidence is on the rise, which may have a positive effect.
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
A recovery of the Danish economy is still expected, according to SEB Group (SEB Group, 2023). In recent months, the Danish Government has been declaring that the Danish economy is doing well, and that the economy has proved to be resilient (Danish Ministry of Economic Affairs, 2023). The Danish GDP has increased, and continues to do so, and is mainly driven by the pharmaceutical industry and the public sector (Statistics Denmark, 2023b). Currently, the GDP is expected to increase in 2023 by 1.2% and by 1.5% in 2024 before picking even more up in 2025 with 3.0% (SEB Group, 2023). So, no form of recession is expected to hit the Danish economy.
Consumer confidence is on a path to recovery from a sharp setback in 2022, fueled by a decrease in inflation that has continued during the summer. This is restoring the consumer spending power, while unemployment rates continue to be low (SEB Group, 2023). Thus, there is a decent outlook for private consumption (Danske Bank, 2023).
Unemployment continues to be low in Denmark, with just 2.8% of the workforce being without employment (Statistics Denmark, 2023a), as has been the case all of 2023. This positively affects the economy and increases consumer spending after a period of pressure due to high inflation.
Despite having strong financial balances, the Danish government does not plan on increasing its spending significantly. In the last two years, the financial and monetary policies have been tightened, and now they are preparing for policies that will neither speed up, or slow down the economy (Danish Ministry of Finance, 2023).
Sweden
It is becoming more clear that inflation is headed down, which will positively affect the economy. Despite this, slightly weaker growth is expected and Danske Bank’s (2023) forecast for GDP growth in 2023 is now set to 0.0%, possibly fueled by a weakening of SEK. Nonetheless, GDP is anticipated to grow in 2024.
Despite resilient households in Sweden, there has been a decrease in private consumption, according to SEB Group (2023). However, it should be noted that private consumption up until now has been held up by Swedes reducing their savings. Consumer confidence has recovered since early 2023 (Danske Bank, 2023), and decelerating inflation might positively affect the economy (SEB Group, 2023). It is expected that the decrease in inflation will increase real wages in Q3 and Q4 of 2023 (Ibid.).
The labor market in Sweden continuously shows resilience, with employment rates are record high (Danske Bank, 2023). There are still reports about labor shortages, however, the labor supply is growing, which has a stabilizing effect on the economy as a whole, even though other parts of the economy might be struggling.
It is clear that the Swedish government finances have remained strong, in spite of slower growth and higher costs that affect the budget negatively (SEB Group, 2023). There continues to be a strong desire to keep inflation down and stabilize the economy further.
Norway
The growth in GDP is expected to slow down in 2023, yet the economic activity has remained positive in the first half of 2023 (Danske Bank, 2023; SEB Group, 2023). At the time of writing, a GDP growth of 1.2% is expected for 2023, and 1.4% in 2024, so a moderate yet consistent growth, according to Danske Bank.
As reported earlier this year, consumer spending has been doing really well in Norway, considering inflation, etc. This is a result of large private savings that Norwegians have been digging into. It is expected that real disposable income will accelerate, however, an increase in consumer spending might be restrained as Norwegians might turn to building their savings once more (SEB Group, 2023).
While unemployment rates continue to be low, there has been a slight increase in recent months. Danske Bank (2023) predicts that by the end of 2023, the unemployment rate will rise to approximately 2.2-2.3%, a figure that is still considered notably low. This has a positive impact on the economy and could ensure sustained consumer spending in the upcoming months.
Norway’s existing economic policies aim to protect household finances by regulating inflation. This has proved to be a difficult task, as inflation is not fully under control yet.
Finland
While Finland’s economy has shown greater resilience than anticipated, it is now projected to experience a 0.2% decline in GDP for 2023. However, this is expected to rebound with a 0.8% growth in 2024 (Danske Bank, 2023). Inflation is about to go down in Denmark, despite the economy price pressures continuing to be high (SEB Group, 2023). This is in part due to wage increases and high service prices, but it is expected that inflation will slow in the coming months or next year.
Consumer spending is on the path to recovery, supported by a continuously low unemployment rates. Despite the consumer confidence indicator worsening from July to September, it is clear that the Finnish consumer confidence is in a better place than 2022 (Statistics Finland, 2023). Despite this, Finns are generally consuming less (SEB Group, 2023).
Unemployment continues to be low in Finland, despite expectations to grow to 7.2% in 2024, up from 6.8% in 2022. This increase is expected to turn in 2025, as unemployment is expected to drop to 6.9%, near 2022 numbers (SEB Group, 2023).
The newly appointed Finnish government has a clear focus for their economic policy, which aims to foster sustainable economic growth that supports employment and diminishes central government debt.
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References
Danish Ministry of Economic Affairs. (2023, August 31). Økonomisk Redegørelse: Fremgangen i dansk økonomi fortsætter, men i et roligere tempo. https://oem.dk/nyheder/nyhedsarkiv/2023/august/oekonomisk-redegoerelse-fremgangen-i-dansk-oekonomi-fortsaetter-men-i-et-roligere-tempo/
Danish Ministry of Finance. (2023, August 31). Fremtidssikring af Danmark. https://fm.dk/udgivelser/2023/august/fremtidssikring-af-danmark-finanslovforslaget-2024/
Danske Bank. (2023). Nordic Outlook: Divergent fortunes. http://www.danskebank.com/danskeresearch
SEB Group. (2023). Nordic Outlook, August 2023.
Statistics Denmark. (2023a). Lille stigning i ledigheden i juli. https://www.dst.dk/da/Statistik/nyheder-analyser-publ/nyt/NytHtml?cid=44847
Statistics Denmark. (2023b, August 31). BNP-fremgang på 0,3 pct. i andet kvartal 2023. https://www.dst.dk/da/Statistik/nyheder-analyser-publ/nyt/NytHtml?cid=45325
Statistics Finland. (2023, September 27). Consumer confidence weakened in September 2023 – unemployment was thought to worsen. https://www.stat.fi/en/publication/cl7q7kt0f5fyx0cw32p8qmvdn
