The economic outlook for the Nordics and Baltics in 2025 is shaped by a combination of resilience and adaptability in the face of global economic challenges.

The overall economic landscape in the Nordics and Baltics is characterised by moderate growth, supported by strong government finances, rising real incomes, and lower interest rates. However, global uncertainties, such as trade tensions and geopolitical risks, continue to pose challenges.

Let us dive into each country.

Denmark

Denmark’s economy is experiencing high growth, primarily driven by the pharmaceutical industry. The growth is expected to become more broad-based as household real incomes increase and interest rates are lowered. Private consumption is ticking up, and exports are growing strongly, contributing to a substantial current account surplus. Lower interest rates can benefit household consumption and may also positively impact the travel and tourism industry (Danske Bank, 2025; SEB Group, 2025).

Consumer spending: Private consumption in Denmark is on the rise, supported by increasing real incomes and lower interest rates. The pharmaceutical industry continues to drive growth, but other sectors are also contributing to the overall economic expansion. Despite consumer confidence falling, there are other positive aspects that drives consumption such as real wage increases, lowered mortgage rates, and record-high employment (Ibid.).

Labour market: The Danish labour market remains strong, with low unemployment rates and rising wages. The government’s focus on increasing defence spending and other public investments is expected to create more job opportunities and further support the labour market. Last year, the labour market hit an all-time high regarding employment, benefiting households (Ibid.).

Sweden

Sweden is set for further recovery in 2025. It is expected that the Riksbank will reduce its policy rate to 2 per cent, easing household and business interest expenses further. Growth is gradually improving, with household financial positions strengthened and housing prices expected to rise by 5 per cent annually in the years to come (Danske Bank, 2025). GDP growth is expected to increase in 2025 with 1.6 per cent and further in 2026 by 2.9 per cent, according to SEB Group (2025).

Consumer spending: Swedish households are benefiting from lower interest rates and rising incomes (SEB Group, 2025). Consumer spending is expected to increase as real wages increase and taxes are lowered (Ibid.), however, consumer confidence has been falling in recent months. That said, this may change if the unemployment falls again, which is expected to happen by next year (Danske Bank, 2025).

Labour market: The Swedish labour market is stabilising after a period of weakness. While unemployment rates are expected to increase in 2025, the labour market is anticipated to rebound. As such, labour market indicators have shown a slight improvement, partly due to rising growth, and unemployment may stabilise after the summer (SEB Group, 2025). Increased spending on defence and other areas may also contribute to job creation.

Norway

Norway’s economy is expected to grow in 2025 and 2026. Productivity growth will lead to higher unemployment due to weaker labour supply growth. Inflation is projected to decrease, reducing wage growth. GDP growth has been modest but should improve in the coming years (Danske Bank, 2025; SEB Group, 2025; Statistics Norway, 2025). So far in 2025, employment has increased by 0.4 per cent.

Consumer spending: Norwegian households are expected to increase their spending as interest rates are lowered and real incomes rise (SEB Group, 2025). This stronger purchasing power is likely to benefit the travel and tourism industry as well, while households may also focus on rebuilding savings, which have taken a hit in recent years, to sustain household consumption in general. The government’s fiscal policies and investments in the energy sector will also support consumer spending (Danske Bank, 2025).

Labour market: The Norwegian labour market is expected to see a moderate increase in unemployment due to higher productivity growth. However, unemployment is still low and is expected to be at 2.2 per cent in 2025, which is lower than previous predictions (Danske Bank, 2025).

Finland

Finland continues a slow recovery, and the fall in interest rates is expected to continue and support recovery. Housing construction is bottoming, and unemployment is expected to rise temporarily, until the economic growth takes off further and increases the need for labour (Danske Bank, 2025).

Consumer spending: Finnish households are expected to increase their spending as real incomes rise and interest rates fall (Danske Bank, 2025). Consumer confidence is low, but expected to recover gradually. However, as unemployment decreases and household finances improve, consumer confidence might improve even further (SEB Group, 2025).

Labour market: The Finnish labour market is anticipated to witness a temporary increase in unemployment during the economic recovery. This trend has been observed over the past two years. Current indicators, however, suggest minimal improvement but also no significant deterioration. The unemployment rate is expected to increase to 8.8 per cent in 2025, before declining to 8.3 per cent in 2026, further underlining the fact that Finland’s economy is improving (SEB Group, 2025).

Lithuania

Lithuania entered 2025 on a positive note, benefiting from declining interest rates and stable real wage growth. While increased EU funding and significant investments in defence are expected to boost the economy, challenges such as slower export growth due to US trade policies remain. Additionally, the possibility of withdrawing pension funds might further stimulate consumer spending in 2026, although this effect could be balanced out by proposed changes to taxation on corporate profits, income, and real estate. The GDP growth is expected to be slightly lower in 2025 compared to 2024, mainly caused by the uncertainties with US trade policies. That said, the GDP growth is still anticipated to be around 2.7 per cent, according to SEB (2025).

Consumer spending: Consumer confidence has retreated from its peak due to higher inflation, greater geopolitical uncertainty, and discussions about tax changes. However, consumption growth remains strong, and the labour market is, to a great extent, stable. Wage growth is projected to slow down but will remain well above inflation. Currently, inflation is at 3 per cent, which still could be regarded as low, despite increases in recent months (SEB Group, 2025; Statistics Lithuania, n.d.).

Labour market: The labour market in Lithuania is stable, and significant deterioration during 2025-2026 is not anticipated (SEB Group, 2025). The unemployment rate has been declining throughout 2024 (Statistics Lithuania, 2025). Wage growth is expected to slow down but will remain well above inflation, which should be seen as very positive (SEB Group, 2025).

Latvia

Despite facing renewed global challenges, Latvia’s economic recovery is anticipated to gain momentum in 2025 and 2026. The rise in real wages and the reduction in interest rates will bolster consumption, while investments will be supported by inflows from EU funds and increased defence spending. Inflation is expected to rise in 2025 and then slightly decrease in 2026 (SEB Group, 2025). GDP has not changed significantly, but is expected to increase in 2025 (Central Statistical Bureau of Latvia, 2025a; SEB Group, 2025).

Consumer spending: Consumer confidence is improving, and retail sales are expected to gradually recover. Lower interest rates will further support the real estate market and lending. Furthermore, inflation overall is expected to decline in the second half of 2025 and in 2026, however, it remains relatively low (SEB Group, 2025).

Labour market: Although the labour market experienced a slight increase in the unemployment rate in early 2025, it is expected to improve, mainly driven by the construction and manufacturing sectors. As a result, the unemployment rate is projected to decrease to 6.3 per cent in 2026, down from 6.9 per cent in 2024. However, wage and salary growth is anticipated to slow during 2025-2026 (Central Statistical Bureau of Latvia, 2025b; SEB Group, 2025).

Estonia

Estonia’s economic performance has surpassed expectations, though progress is hindered by rising taxes and ongoing inflation. GDP growth is projected at 1.8 per cent this year, with a stronger rebound of 2.8 per cent anticipated in 2026 (SEB Group, 2025). Thus, the recovery of Estonia’s economy has begun, which is seen in a number of ways, e.g., decline in unemployment rate as well as increase in household consumption (Ibid.).

Consumer spending: Consumer spending is expected to increase in 2025 and more so in 2026, however, consumer confidence remains low. Lower interest rates are helping, so is the wage growth, which remains above the inflation rate (SEB Group, 2025).

Labour market: The labour market in Estonia remains robust. Although wage growth has moderated, unemployment has gradually decreased. The unemployment rate is projected to decline to 7.2 per cent this year, with wage and salary growth slowing from 8.1 per cent last year to 6.5 per cent in 2025 (SEB Group, 2025). However, industrial output growth in Estonia is currently at a 3-year high, which may also impact the labour market (Trading Economics, 2025).

Concluding remarks

The Nordics and Baltics are navigating through a complex economic environment with a mix of opportunities and challenges. While strong government finances and rising real incomes provide a solid foundation for growth, global uncertainties and geopolitical risks require careful monitoring. The resilience and adaptability of these economies will be crucial in achieving sustainable growth in the coming years.

References

Central Statistical Bureau of Latvia. (2025a). In the 1st quarter, the main drivers of GDP were trade, construction, and information and communication services | Oficiālās statistikas portāls. https://stat.gov.lv/en/statistics-themes/economy/gross-domestic-product-quarterly-data/press-releases/22902-gross-domestic

Central Statistical Bureau of Latvia. (2025b). Unemployment rate (%). https://stat.gov.lv/en/statistics-themes/labour-market/unemployment/4419-unemployment-rate?themeCode=NBBA

Danske Bank. (2025). Nordic Outlook: Normalising economies despite the noise.

SEB Group. (2025). Nordic Outlook: Tarriffs and uncertainty are slowing down the world.

Statistics Lithuania. (n.d.). The May inflation provisional estimate calculated based on the harmonised index of consumer prices (HICP). Retrieved June 5, 2025, from https://osp.stat.gov.lt/informaciniai-pranesimai?articleId=13597789

Statistics Lithuania. (2025). Main Lithuanian indicators. https://osp.stat.gov.lt/pagrindiniai-salies-rodikliai

Statistics Norway. (2025). Norwegian economy increased in the first quarter. https://www.ssb.no/en/nasjonalregnskap-og-konjunkturer/nasjonalregnskap/statistikk/nasjonalregnskap/artikler/Norwegian%20economy%20increased%20in%20the%20first%20quarter

Trading Economics. (2025). Estonia. https://tradingeconomics.com/estonia/news