The Nordic economies of Sweden, Denmark and Norway are cooling off after years of expansion as global trade tensions mix with domestic factors to stifle investment, a Reuters poll found.
The export-dependent region, home to companies like fashion retailer H&M, logistics giant Maersk and metals maker Norsk Hydro, has for decades benefited from the gradual globalisation of markets.
But the ongoing trade war between the United States and China over tariffs and trade, as well as lingering uncertainty over Britain’s pending exit from the European Union, are seen hurting investment and demand.
“We keep seeing worse numbers, especially for the manufacturing industry globally, and that’s affected by the trade war, falling investment in China and a general recession after the long upturn we’ve had,” Danske Bank chief economist Las Olsen said.
“This affects the Nordic countries and is the main reason we have seen the downward adjustments of growth outlooks,” he added.
In Sweden, a boom in house building has ended, probably shaving half a percentage point off growth in gross domestic product this year, according to SEB economist Olle Holmgren.
“And then we have an international process with the industry and global growth slowing down. Sweden has resisted that to some extent, but there are signs that it is also slowing down here,” Holmgren said.
“That usually spills over to domestic demand. Consumers (get) worried and investments will not increase as much or may even fall,” he said.
The largest Nordic economy and the fastest-growing each year from 2013 to 2018, Swedish GDP is set to expand by 1.4% in 2019, down from 2.4% last year. That’s the weakest in six years and below a 1.8% forecast in a July survey.
It would make Sweden the most sluggish of the three countries this year and could remain so in 2020, when growth is expected to slow further, to 1.3%, predictions showed.
In Norway, growth is likely to drop from 2.3% in 2019 to 1.8% next year as a boom in oil industry investment in recent years is forecast to gradually fade.
Denmark is expected to see a decrease from 1.9% growth in 2019 to 1.5% next year. The economy is close to full employment, Danske Bank’s Olsen said, and the economy had largely run out of spare capacity.