Although the pandemic continues to hold the world economy in an iron grip, there is hope ahead. The historically rapid development and rollout of effective COVID-19 vaccines paves the way for a more permanent reopening of communities over the spring. Economic policy will continue to be lenient and support overall growth as well as the financial and housing markets.

The Nordics have been performing better than feared in 2020, and there is reason for optimism for the coming years. In all of the Nordic countries, a lenient monetary and fiscal policy supported a strong rise in housing markets, which is key for the overall economic development.

Despite losing steam in the near term, conditions are in place for a rapid recovery in Sweden later in 2021. Production and consumption of goods recovered in the autumn, services are expected to recover in 2021, and GDP growth should level out in line with the longer-term trend in 2022. The Riksbank is expected to stay on hold throughout the forecast horizon as cost pressures are low.

Finland’s economy fared relatively well in 2020, with an expected drop in GDP of only 3%. Private consumption is expected to drive growth in 2021, fuelled by pent-up demand and employment growth. The export outlook has also improved, on the back of the recovery in world trade.

2021 kicked off with fierce headwinds for the Danish economy due to renewed coronavirus restrictions, but the vaccine rollout has sparked hopes of an easing relatively soon. This will underpin consumption and investment, even when large parts of the economy remain locked down.

Vaccines offer the prospect that life in Norway may return to a kind of normal by the summer. The economy will then be able to recover quickly. The large increase in household savings, combined with people’s strong desire to return to normal, paves the way for solid growth in service consumption this year. The rebound could be powerful, and the first interest rate hike from Norges Bank could come before the end of this year.