POLL-Strong Nordic economies less vulnerable to inflation, Ukraine war

Credit: REUTERS/SIMON JOHNSON

reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=SEGDPAAP Sweden poll data

reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=NOGDPAAP Norway poll data

reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=DKGDPAAP Denmark poll data

COPENHAGEN, April 27 (Reuters) - Nordic countries' economies are set to grow slower than previously expected this year, with the outlook clouded by rising inflation and uncertainty related to the war in Ukraine, a Reuters poll of economists showed.

While Nordic economies were among the quickest in Europe to recover from the coronavirus pandemic, the pace of growth was already seen declining before Russia invaded Ukraine on Feb. 24.

Still, the Nordic countries, which are among the wealthiest in the world, are seen as less vulnerable to rising inflation and energy prices than their European neighbours.

Norway, Sweden and Denmark all had limited trade with Russia before the war and are less dependent on Russian oil and gas supplies than most other European countries, given large renewable energy and nuclear power capacity.

In addition, many households in the Nordics rely on district heating and electricity to heat their homes, which means they are less affected by soaring energy prices than other European consumers.

"This means that the inflation shock is generally smaller in the Nordics, and hence also that the revisions to the growth outlook are generally smaller than in the euro area," Danske Bank said in a note.

Governments in all three countries have also laid out plans for higher spending to offset the effects of a surge in energy prices on both households and businesses.

The Nordic nations coped relatively well with the COVID-19 pandemic and their economies are seen as resilient given high vaccination rates and households flush with cash.

In Sweden and Norway, however, central banks are expected to hike interest rates this year to fight inflation, which is likely to hit private consumption.

The Norwegian economy will continue to grow strongly in 2022 as the recovery from the pandemic continues, before easing to its long-term trend level of around 2% or less in following years, the forecasts showed.

Analysts predicted growth of 3.7% for Norway in 2022, slightly lower than the 3.9% seen in January, and with expansion of 2.0% for 2023.

Sweden's economy has also bounced back quickly from the effects of the pandemic. Economic growth is seen at 3.0% this year, down from 3.5% forecast at the beginning of the year, and compared to a 4.8% expansion last year.

Denmark's economy, which is driven by exports and private consumption, is running at close to full capacity, boosted by large economic aid packages during the pandemic.

Economists say external risks could help ease bottlenecks in an economy where unemployment has fallen to near 50-year lows in recent months.

Economists expect Denmark's economy to grow 2.7% this year compared to a January forecast of 3.0%.

(Reporting by Jacob Gronholt-Pedersen in Copenhagen, Simon Johnson in Stockholm and Terje Solsvik in Oslo; Polling by Prerana Bhat and Susobhan Sarkar in Bengaluru Editing by Tomasz Janowski)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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