As 2022 begins, recovery from the COVID-19 pandemic is being challenged by high inflation, rapid virus transmission and geopolitical risks. Central banks are speeding up their normalisation of key interest rates, and the US Federal Reserve's plans to start trimming its balance sheet are scaring the stock and fixed-income markets. Security policy tensions between
"For various reasons our forecast picture has become more uncertain, but we are also seeing increased hopes of relief from the pandemic once the latest wave has passed. Our forecast is based on the assumption that its effects on the economy will ease in the near future and that significant new disruptions can be avoided in
The global economy: Central banks seek to balance high inflation and markets
We expect global growth to slow from nearly 6 per cent in 2021 to just over 4 per cent this year. High inflation, which undermines household purchasing power, and the effects of the Omicron wave early this year are contributing to a downward adjustment in our 2022 GDP growth forecast by about a quarter of a percentage point, both for the global economy and the mainly affluent
Inflation looks set to persist longer than expected, but we are sticking to our view that it will fall sharply late in 2022, due to peaking energy prices and a gradual easing of disruptions in production chains. Unemployment in many countries has fallen to pre-pandemic, or nearly pre-pandemic, levels. This has increased the pressure on central banks to withdraw stimulus programmes.
"If we should see signs of a clear wage-price spiral, central banks would have to tighten their policies to ensure that inflation expectations don't soar and completely lose touch with inflation targets. In that case, there would be a risk of plunging share and home prices. As for geopolitics, experience indicates that it takes an exceptional turn of events for this type of tensions to affect economic activity over an extended period. But a Russian invasion of
The Swedish economy will also lose momentum over the next few quarters, but we expect growth to regain speed when global production disruptions ease and energy prices fall back. After a stronger-than-expected upturn of nearly 5 per cent last year, GDP will grow by 3 per cent this year, about half a percentage point lower than in our November forecast. Meanwhile, we have adjusted our 2023 forecast slightly higher, to 2.7 per cent. Consumption is increasing despite inflation headwinds, and the labour market is heating up. Home prices will continue to rise, but at a slower pace than before in a more uncertain interest rate environment.
We expect CPIF inflation (CPI less interest rate changes) to remain above 4 percent during the first half, before falling in the latter part of 2022. The upturn in Swedish core inflation excluding energy prices appears moderate compared to other countries, but core inflation will still reach the highest levels since the Riksbank introduced its inflation target in the mid-90s. This raises questions about the Riksbank's cautious interest rate path.
"The Riksbank has historically not been afraid to stand out. But with an increasingly tight labour market and accelerating pay increases, it is doubtful whether the Riksbank will really choose a completely different path than most other central banks. Our forecast is two rate hikes during the second half of 2023, while the Riksbank will begin to trim its balance sheet as early as this year," says
Nordics:
The other Nordic economies will continue to grow at a healthy pace this year, with only minor revisions in our forecasts compared to November. However, a tight resource situation will lead to increasing price and wage pressures in
Key figures: International & Swedish economy (figures in brackets are from the
International economy, GDP, year-on-year changes, % | 2020 | 2021 | 2022 | 2023 |
-3.4 | 5.6 (5.6) | 3.5 (3.9) | 2.1 (2.2) | |
Euro area | -6.4 | 5.3 (5.1) | 4.0 (4.4) | 2.9 (2.6) |
-9.4 | 7.2 (6.9) | 4.5 (4.9) | 2.9 (2.8) | |
-4.6 | 2.0 (2.5) | 3.2 (2.7) | 1.2 (1.2) | |
-4.6 | 5.2 (5.2) | 3.7 (3.9) | 2.4 (2.4) | |
2.2 | 8.1 (8.2) | 5.2 (5.2) | 5.4 (5.4) | |
Nordic countries | -2.2 | 4.2 (4.1) | 3.3 (3.5) | 2.5 (2.4) |
Baltic countries | -1.7 | 5.6 (5.7) | 3.8 (4.0) | 3.4 (3.5) |
The world (purchasing power parities, PPP) | -3.3 | 5.8 (5.7) | 4.1 (4.4) | 3.6 (3.5) |
Nordic and Baltic countries, GDP, year-on-year changes, % | ||||
-0.7 | 3.9 (2.8) | 4.0 (3.7) | 2.5 (2.6) | |
-2.1 | 4.0 (5.0) | 3.3 (3.5) | 3.0 (2.5) | |
-2.8 | 3.5 (3.5) | 3.0 (3.0) | 1.6 (1.6) | |
-0.1 | 4.9 (4.9) | 3.5 (3.6) | 3.3 (3.3) | |
-3.6 | 4.5 (4.5) | 4.6 (5.0) | 3.8 (4.2) | |
-3.0 | 8.2 (8.8) | 3.3 (3.8) | 3.0 (3.0) | |
Swedish economy, year-on-year changes, % | ||||
GDP, actual | -2.8 | 4.9 (4.6) | 3.0 (3.6) | 2.7 (2.5) |
GDP, working day corrected | -3.0 | 4.8 (4.5) | 3.1 (3.6) | 2.8 (2.6) |
Unemployment, % (EU definition) | 8.8 | 8.8 (8.8) | 7.6 (7.7) | 7.2 (7.3) |
CPI (consumer price index) | 0.5 | 2.2 (2.0) | 3.1 (2.5) | 1.7 (1.5) |
CPIF (CPI minus interest rate changes) | 0.5 | 2.4 (2.3) | 3.3 (2.6) | 1.5 (1.5) |
Government net lending (% of GDP) | -2.8 | -0.6 (-1.0) | 0.7 (0.0) | 0.7 (0.7) |
Repo rate (December) | 0.0 | 0.0 (0.0) | 0.0 (0.0) | 0.50 (0.25) |
Exchange rate, EUR/SEK (December) | 10.05 | 10.29 (10.00) | 10.05 (9.90) | 9.70 (9.70) |
You can find more information about Nordic Outlook, as well as the presentation of the report, at sebgroup.com/nordicoutlookreport
For further information, contact:
Håkan Frisén: +46 70 763 8067
Per Hammarlund: +46 76 038 9605
Marcus Widén: +46 70 639 1057
Press contact:
+46 70 763 8243
niklas.x.magnusson@seb.se
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