Swedish economy set to slow in 2019 as Norway takes lead: Reuters poll

OSLO (Reuters): Sweden’s economic prospects have dimmed in recent months and the country will likely be surpassed by Norway as the fastest-growing Scandinavian economy in 2019, a Reuters poll found on Tuesday.

It would be the first time in more than half a decade Sweden failed to top the region’s growth league, although it was still set to expand at a slightly faster pace than Denmark, the final member of the northern European trio.

“Norway and Sweden are in many ways in different stages of the cycle,” Nordea Markets economist Erik Bruce said. “Norway is on its way up after a weak period, while Sweden is facing the opposite development. Following a period of strong growth, Sweden is looking weaker as its main export markets are losing steam,” he added.

While Sweden is expected to expand 2.6% in 2018, its growth rate is forecast to drop to 2.0% next year, the lowest since 2013 and lagging the 2.2% seen for Norway, while Denmark at 1.9% will be a close third.

As a major producer of oil and gas, the Norwegian economy slumped following the 2014 crash in energy prices, but has since picked up speed as the price of crude gradually recovered.

“The main driver of growth in Norway going forward is oil investments picking up again, with growth in oil related businesses rebounding after years of decline,” Nordea’s Bruce said.

By contrast, Sweden has boomed amid high government spending to handle a wave of immigration, as well as ultra-loose monetary policy, but the effects are wearing off as the flow of newcomers is curbed and the central bank seeks to slowly tighten policy. In Denmark, which pegs its currency to the euro and has seen labour shortages in recent years, growth has remained subdued, albeit on an upwards trend, and is expected to climb to 1.9% in 2019 from 1.6% this year.

The poll predicted unemployment would fall in all three countries in 2019, while consumer prices would accelerate.