STOCKHOLM (Reuters) – The recession in Sweden and Norway from the COVID-19 pandemic is now expected to be shallower than originally projected, but forecasts for the recovery next year have been trimmed back in the latest Reuters poll of economists.
The Nordic countries, including Denmark and Finland, have 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.
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, which did not lock down, will suffer a 4.0% economic contraction this year, compared with the 5.0% expected three months ago. Norway’s economic contraction is now forecast at 3.6% versus 4.5%, compared with the July poll. Denmark was down to 4.2% from 4.3%.
Those are all about half the 8.1% contraction forecast for the euro zone in a September Reuters poll.
Next year, Sweden, Norway and Denmark are now expected to report economic growth of 3.5%, 3.6% and 3.5%, respectively, down from 3.9%, 4.0% and 3.8% forecast in the previous poll.
“Having outperformed in H1, the Nordic economies are set for some of the smallest falls in output in Europe this year,” noted Andrew Kenningham, chief Europe economist at Capital Economics.
“Of course, the virus is the key uncertainty for the outlook, but it is encouraging that Denmark’s second wave already looks to have peaked and Norway and Sweden have so far side-stepped the scale of renewed cases seen in the worst-hit countries.”
France has imposed a four-week curfew in Paris and eight other big cities to try to halt a second wave of infections sweeping across the continent.
Another widespread lockdown across Europe would nip economic recovery in the bud and hit the Nordics. Denmark and Sweden have seen a sharp increase in recent weeks. Cases are also rising in Norway, though the infection rate is low.
With uncertainty about the recovery high, benchmark rates in Norway and Sweden are likely to remain at zero through this year and probably 2021 as well.
More European Central Bank stimulus, possibly in December, could push Sweden’s central bank into further policy easing, with an expansion of its 500 billion-crown ($57 billion) quantitative-easing programme the most likely option.
($1 = 8.7771 Swedish crowns)
(For other stories from the Reuters global economic poll:)
(Reporting by Simon Johnson in Stockholm; polling and additional reporting by Indradip Ghosh in Bengaluru; editing by Ross Finley)
