According to HSBC global economist James Pomeroy the degree of fiscal support available in Norway and Sweden offers cause for a rosier outlook than the rest of the developed world. Therefore, Scandinavia is expected to have an economic kick-start in 2021.
Improving consumer and capital spending, combined with continued fiscal stimulus, drive a rebound in domestic demand in Scandinavia. Also, a Reuters poll of economists predicts that the recession in Sweden and Norway from the COVID-19 pandemic is now expected to be shallower than originally projected.
Both Sweden and Norway notched better-than-expected recoveries in the third quarter, with GDP (gross domestic product) expanding by 4.3% and 5.2% respectively after the second-quarter slump at the height of the coronavirus crisis.
Inflation came in at 0.7% in October, unchanged from September’s reading. In 2021, regional inflation is forecast to pick up on higher consumer spending and improving labor markets, having fallen significantly last year.
Positive news on vaccines
Scandinavia has been less badly hit than many European economies, despite taking very different approaches to fighting the spread of virus, with Sweden opting for the most-lax response on the continent.
Alongside the positive news on vaccines driving optimism about a global economic recovery in 2021, HSBC global economist James Pomeroy said in a recent research note that “the degree of fiscal support available in both countries offers cause for a rosier outlook than the rest of the developed world”.
However, relatively low oil prices and uncertainty around the trajectory of the pandemic are likely to keep price pressures muted nonetheless. Central banks in the region maintained ultra-accommodative monetary policies over the past month, with Norges Bank holding rates at 0.00% at its 5 November meeting. Overall, regional monetary policy is projected to remain loose in 2021 as central banks seek to continue measures taken this year to bolster the economic recovery.
Strong digital culture
Less reliance on services and tourism and a strong digital culture are among reasons economists said the region has escaped worse economic damage, as well as relatively swift and early lockdowns in Norway and Denmark.
Sweden and Norway tightened restrictions over the past month, despite Sweden’s previous skeptical stance on lockdowns. Although not quite as stringent as the measures taken elsewhere on the continent, Swedish Prime Minister Stefan Lofven has urged the public to avoid gyms, libraries and restaurants and cut the limit on public gatherings from 50 to eight.
Scandinavia Expected to Have an Economic Kick-Start in 2021, written by Tor Kjolberg