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Nordic & Swiss

Nordic & Swiss Economics Update

50 is the new 25 for the Norges Bank

Following today’s decision by the Norges Bank to raise its policy rate by 50bp at the second consecutive meeting, we now expect the Bank to make it a hat-trick of 50bp hikes at the next meeting in September. With price pressures looking strong, further rate increases are likely to follow.

18 August 2022

Nordic & Swiss Economics Weekly

Norway faces its own energy crisis

While Norway is not directly in the firing line from the reduction in Russia’s gas exports, it has now got its own problems with low water levels in its hydro reservoirs. This may add a bit to Norway’s electricity inflation and restrict Norway’s electricity exports to continental Europe. That said we don’t think it will stop the Norges Bank from raising interest rates by 50bp at next week’s policy meeting. Drop-In: Europe under siege – The economic impact of Russia’s gas threat Thursday, 18th August 10:00 ET/15:00 BST. Register now.

12 August 2022

Nordic & Swiss Data Response

Sweden Consumer Prices (Jul.)

The decline in CPIF inflation in July will be of limited comfort to policymakers given that the core rate, excluding energy, jumped to 6.6%. We still think the Riksbank may raise its repo rate by a further 50bp before its next scheduled meeting, on 20th September, and will lift it to 2.0% by year-end.

12 August 2022

Key Forecasts

Main Economic Forecasts

 

Share of

World GDP

GDP

Consumer Prices*

2021

2022

2023

2024

2021

2022

2023

2024

Switzerland

0.46

3.7

1.8

0.5

2.0

0.6

2.8

1.4

1.1

Sweden

0.42

4.9

1.8

0.5

1.8

2.4

6.4

2.6

2.1

Norway

0.26

4.2

3.0

1.3

1.5

1.7

5.0

2.5

2.3

Denmark

0.26

4.9

3.0

0.5

1.8

1.9

7.3

2.8

2.0

Sources: Refinitiv, Capital Economics. *CPI for Switzerland, CPIF for Sweden, CPI-ATE for Norway, HICP for Denmark.


Norway faces its own energy crisis

Nordic & Swiss Economics Weekly

30 November 2022

Our view

As highly open economies, Switzerland and Sweden are exposed to weak growth in key trading partners in the eurozone, and Sweden and Switzerland are likely to experience recessions later this year. Having started its tightening cycle in April (as we predicted), the Riksbank is likely to front-load its tightening efforts this year and an unscheduled rate hike before the September meeting is now the most likely outcome. Meanwhile, we expect the Norges Bank to raise rates by 50bp in August and September and to complete the tightening cycle with a 25bp hike in November. Finally, the SNB stole a march on the ECB by raising its policy rate by 50bps in June, but we expect the ECB to pull ahead in the rate-hike stakes before long.

Latest Outlook

Nordic & Swiss Economic Outlook

Rate hikes and recessions loom large

The near-term economic outlook has deteriorated in recent months and Switzerland, Sweden, and Denmark are set for mild recessions in late 2022 and early 2023. This is partly a function of external weakness; as highly open economies, the recession in the key trading partner of the euro-zone that we forecast later this year will take a toll on exports. But domestic activity will also be constrained by a combination of rising interest rates and related weakness in the housing market and residential investment. This is particularly the case in Norway and Sweden where a large share of mortgages are on floating interest rates and we expect policymakers to front-load tightening efforts this year.

21 July 2022