The Swedish economy will continue to outperform Scandinavian peers in 2018, but is set to slow next year as the region's growth converges around 2 percent, a Reuters poll of economists published on Thursday predicted. In 2017, all three countries grew more rapidly than initially forecast, as global economic strength combined with accommodative monetary policies to spur activity.
Sweden is expected to grow 2.7 percent in 2018, in line with the view expressed in a corresponding Reuters poll in January and up from 2.4 percent the previous year. Central bank rates are soon expected to begin an upwards trend, however, and in 2019 Sweden's growth will ease to a six-year low of 2.2 percent, according to the median forecast. "Swedish growth has been very high for a long time, and we now expect a normalisation with more moderate expansion," said DNB Markets economist Jeanette Stroem Fjaere.
"In particular, we believe investments in housing and other sectors of the economy will weaken," she added. Norway is meanwhile expected to grow 2.2 percent this year and 2.1 percent next, while Denmark will see 1.8 percent and 1.9 percent for the two years respectively. Inflation - which in recent years has been so low it triggered negative central bank rates in Sweden and Denmark and a very low borrowing cost in Norway - is now seen increasing across the region, although slightly less than predicted in January.
Higher rates are also among factors set to dampen growth. "Taken in isolation, it clearly will, particularly when debts are as high as they are in Norway and Sweden," Stroem Fjaere said. "Higher rates will impact households and contribute to weaker private consumption. The underlying factors behind the rates are positive however, such as higher wage growth and lower unemployment, so it's hard to say what the net effect will be." The poll showed unemployment will fall in all three countries.
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