Higher energy prices and rising interest rates in the wake of the Middle East crisis will likely dampen economic activity in Finland later in this year, according to economic forecast released by Nordea Bank on Thursday.
The forecast, however, said that the Finnish economy has returned to broad-based growth, with both private consumption and industrial output picking up and this growth is beginning to support the labour market and public finances.
The war in the Middle East is unlikely to severely impact the global economy unless it becomes protracted or oil prices rise significantly from current levels.
However, uncertainty is high, which in itself negatively affects both business leader and consumer confidence.
At the same time, inflation is rising, and there are prospects for higher interest rates in many regions.
“The Nordic countries have so far not been hit hard by the conflict in the Middle East. None of the countries has significant trade with the region, and the economies are among the most energy-efficient in the world, with a significant share of consumption in all countries coming from renewable energy sources. This gives the Nordic countries a competitive advantage in times of rising oil prices,” said Helge Pedersen, Nordea Group Chief Economist.
The Danish economy stands on a solid foundation with strong public finances and high employment. Geopolitical turmoil will likely lead to lower economic growth and higher inflation than previously expected, although both remain at relatively favourable levels. Consumption is expected to drive activity forward.
Norway’s economy shows resilience to the Middle East conflict, although higher interest rates weigh on the outlook. Persistent above-target inflation, fuelled by higher oil and commodity prices, will likely prompt further tightening from Norges Bank. Unemployment remains low, and the krone continues to strengthen.
Sweden is well-positioned to withstand challenges from the Middle East war, with conditions in place for healthy growth. Rising international demand will support exports while the labour market continues to improve. Low inflationary pressure at the outset gives the Riksbank room to wait and see this year.
- Energy
- Interest
- Rise
- Hit
- Economy
Source: www.dailyfinland.fi
