Vaccination to pave way for rapid growth in Nordic economies

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OSLO — The Nordic region will see rapid economic growth this year and next as it recovers from the shock of the COVID-19 pandemic, a Reuters poll of economists found.

Denmark, Sweden and Norway are each set for expansion of 3%or more in 2021 and 2022, according to the survey, benefiting from economic stimulus and the gradual return to normal life as the rate of vaccinations increases.

Economists have mostly raised their expectations since a similar poll was conducted in January, in particular for Sweden and Norway, which are now seen growing faster than before, both this year and next.

“In the Nordics, consumer confidence is currently above where it was prior to the pandemic,” said Handelsbanken, referring to the wider region that also includes Finland and Iceland.

The most vulnerable parts of the population have either started or completed their vaccination, and all adults are likely to be offered at least their first dose by mid-to-late August, authorities have said.

While the countries adopted different strategies for how to deal with the pandemic, the economic fallout and recovery followed much the same patterns, with less contraction and an earlier recovery than most of the rest of Europe.

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With comprehensive welfare states and sound fiscal positions before the COVID-19 outbreak, and a seamless transition for many people to home office, the variations in virus containment policies did not make much difference economically.

Sweden, which mostly kept schools open and chose soft-touch guidance rather than hard lockdowns, is likely to expand by 3.3% in 2021 and by 3.4% in 2022, more than the 3.0% seen for each of those years three months ago, the poll found.

Preliminary figures released on Thursday showed Swedish GDP bounced back in the first quarter, growing 1.1% from the previous three-month period.

Stronger Swedish growth, however, is unlikely to lead to tighter monetary policy at least in the short term. The central bank said earlier this week withdrawing stimulus measures too soon would nip recovery in the bud.

A BUILT-UP HUNGER FOR CONSUMPTION

In Norway, which closed its borders and opted for strict lockdowns, the expansion this year could reach 3.7%, more than the 3.5% seen previously, and continue at a pace of 3.1% next year, beating a previous forecast of 2.8%.

“With the rollout of vaccines picking up speed, a fuller reopening is expected by this autumn,” Handelsbanken said of the Norwegian economy.

“The near term remains plagued by uncertainties, but we are confident that consumption will rebound strongly as soon as a broader range of restrictions are lifted,” it said.

The Norwegian central bank expects to raise rates in the second half of 2021.

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Denmark has avoided a third wave of infections seen in other countries across Europe and last month began easing restrictions following a drop in infection rates. Restaurants, cafes and shopping malls reopened last week.

“The reopening will boost the economy, as Danes have not had the opportunity to spend money as they used to for a long time. As a result, consumers have built up hunger for consumption, which must be satisfied in the coming quarters,” said Anders Christian Overvad, economist at AL Bank.

Further boosting private spending, Danes last month gained access to cash payouts stemming from holiday allowances that had been frozen over a revamp of the holiday pay system.

“It’s immensely difficult to be pessimistic at the moment,” said Overvad.

Analysts on average expect Danish growth for 2021 of 3.0%, down from 3.5% seen earlier, and growth next year of 3.4%, up from 3.3% predicted in January.

Denmark’s finance ministry on Thursday lowered its expectation for economic growth this year to 2.1%, however, from a previous forecast of 2.8%, but said it expects 3.8% growth next year, the highest rate in 15 years.

(For other stories from the Reuters global long-term economic outlook polls package: ) (Reporting by Terje Solsvik in Oslo, Jacob Gronholt-Pedersen in Copenhagen and Simon Johnson in Stockholm; Polling by Sujith Pai in Bengaluru; Editing by Steve Orlofsky)