Sweden slashed its economic growth forecasts late last week, becoming the third Nordic country to do so in a move that highlights the troubled eurozone’s impact on its trading partners.
The Swedish government cut its gross domestic product (GDP) projection for 2013 to 1.1 percent, compared with a 2.7 percent estimate in September. This year it sees the economy growing by just 0.9 percent, compared with an earlier forecast of 1.6 percent.
“It’s becoming increasingly clear that the crisis in Europe and the events in the US are having a renewed effect on employment and growth in Sweden. We can expect a poor year in 2013,” Finance Minister Anders Borg said in a statement.
The centre-right government, which has been in power since 2006, said it now believes Swedish unemployment will rise next year to 8.2 percent from an average rate of 7.7 percent this year.
Analysts mostly back its view. “Unemployment will inevitably rise in 2013,” Handelsbanken’s Anders Brunstedt wrote in a research note.
But the country, praised by the OECD on Monday for its handling of the economy during the European crisis, is not alone in feeling the effects of the uncertainty surrounding the eurozone.
Neighbouring Denmark, which had already been dipping in and out of recession as its banks buckle under a 25-percent fall in property prices, last week admitted that it too had been too optimistic on future growth.
The Danish government lowered its growth projections for next year to 1.2 percent from the 1.7 percent level stated in August, and said the economy would shrink 0.4 percent this year instead of growing 0.9 percent.
The Finnish economy entered recession in the third quarter, and on Thursday the government halved its growth forecast for next year to 0.5 percent.
Finnish unemployment rose to eight percent in November, its highest level in more than one and a half years.
The three Nordic countries are all heavily reliant on exports, which account for around half of all output in Sweden, 40 percent in Finland, and almost a third in Denmark.
The debate over exports is particularly strong in eurozone member Finland.
“Finnish exports have underperformed the (overall) growth in export markets” due to a large portion of investment goods, poor competitiveness and downscaling at Nokia, once the world’s largest mobile phone maker, analysts at Danske Bank wrote.
In a rare move, two high-profile Finns in Europe, European Central Bank board member Erkki Liikanen and the European Commissioner for Economic Affairs Olli Rehn, have both weighed in on the matter, urging the country to improve its competitiveness and balance its budget.
But Helsinki has so far felt little pressure from voters to implement reforms, with the government’s largest coalition partner, Prime Minister Jyrki Katainen’s National Coalition Party, performing well in October’s municipal elections.
Bucking the Nordic trend is Norway, which — bolstered by its oil production — expects its economy to grow by 3.1 percent this year and by 2.5 percent next year.
Nordic economies cool as chill winds of eurozone bite
