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Nordic Outlook January 2024

The economic situation is awakening increased optimism, despite worsening geopolitical risks. Falling inflation will persuade central banks to start cutting key interest rates this spring and summer. We continue to believe that a soft landing is possible and that the slowdown in the world economy will be mild. The Swedish economic outlook has also improved, and will increase slightly (0.1 per cent) this year. Sweden’s Riksbank will cut its policy rate in May.

Theme: Inflation risks

Inflation is clearly on its way down worldwide and we expect it to be close to central bank targets in 2025. However, there is no lack of risks and alternative scenarios, which we present in this theme with a focus on the United States and the euro area.

Theme: A fateful US election

The November 5 presidential election may have momentous consequences for both the United States and the rest of the world. We present important milestones leading up to the election and what we can expect from main candidates Trump and Biden.

USA

The economy is decelerating but the Federal Reserve is holding off on declaring victory over inflation, since the labour market remains strong and there is a lingering risk of wage-driven inflation. We expect GDP growth of 0.5 per cent in 2023.

Euro area

Inflation is past its peak but will remain relatively high. Combined with higher interest rates, this will lead to a mild recession in 2023. The European Central Bank will soon hike its deposit rate to 3.25 per cent, before cuts begin in early 2024.

China

China’s political leaders are now focusing on economic recovery. GDP will increase by 5.5 per cent this year. Strict COVID-19 controls have been dismantled faster than anticipated. We are revising our 2023 CPI inflation forecast upward to 3.0 per cent.

Sweden

After impressive economic resilience, we expect a 1.2 per cent GDP decline this year. Downside risks are mainly connected to a potential collapse in housing construction, while more vigorous fiscal stimulus measures represent upside opportunities.