External circumstances and the market
Tromsøbadet
Tromsö
Global slowdown
Global growth slowed in 2019. Although this development was expected it was heightened by political turbulence and trade wars. The global economy lost some momentum and even the US economy declined. The downturn in the European economy was affected by international uncertainty and concern for a hard Brexit, which made the export industry, which presented weaker numbers than usual, less willing to invest. The growth rate was only half a percent in the Eurozone’s important motor, Germany. Slight inflation signals taking into consideration a cooler economy have led central banks around the world to communicate that interest rate levels will continue to be low for quite some time. This policy has contributed to fuel the international stock markets that developed very strongly in 2019. It looked like the industrial cycle had bottomed out and a certain optimism about the global economy and growth was in the air, despite continued protectionism and political uncertainty. However, with the beginning of 2020 came the outbreak of the coronavirus and it soon gripped most of the world. This changed everything in the blink of an eye. At the time of writing this many countries have closed their borders and daily life has been severely restricted to brake the reach and speed of the spread of the virus. Its effects on people, companies and communities are far-reaching and governments all over the world are forming relief packages to counteract the negative effects of drastically reduced consumption of products and services. There is considerable uncertainty concerning economic development going forward, although a significantly weaker business cycle in the next few years is anticipated. A substantial negative effect on growth is expected in 2020 followed by some recovery in 2021. How profound and lasting these effects will be globally hinges on how quickly countries can contain the virus while mitigating the negative consequences on national economics.
The economy in the Nordic countries
Sweden
In 2019 the Swedish economy left the boom economy behind and entered a period of weaker growth. Gross investments dropped in 2019 as a result of fewer investments in machines and construction. Orders to industrials took a negative turn. With the onslaught of the coronavirus it appears international demand will continue to weaken and business investments will continue to contract. Continued low interest rates can hopefully boost household consumption somewhat and increase borrowing options for businesses, which could mitigate growing unemployment and lessen the economic effects. It is difficult to assess what the effects on the GNP will be but the consensus is a decline for the entire year of 2020. How steep the decline will be depends on how quickly uncertainty and the negative effects can be curtailed.
Norway
The Norwegian mainland economy accelerated in 2019, largely due to an oil-related demand. For the Norwegian economy the outbreak of the coronavirus came at the same time as a sharp dip in oil prices caused primarily by a plunge in demand for fuel. This, in turn, has had a substantial effect on the Norwegian labor market, causing layoffs, and on the Norwegian krone which in March 2020 was severely weakened. As a reaction to the declining economic situation the central bank of Norway reduced the policy interest rate from 1.5 percent to 0.25 percent in an attempt to stimulate the economy.
Finland
The slowdown in global growth in 2019 is expected to have only had a marginal effect on the Finnish economy. Service exports were high during 2019 and together with falling unemployment and rising wages private consumption fared better than expected. However, investments were generally weak. Household consumption had already cooled before the coronavirus outbreak, primarily due to a more negative view of the Finnish economy rather than concern for their own situation. In March 2020 the central bank of Finland estimated that GNP would contract by 1.5-4 percent in 2020 as a result of the coronavirus pandemic and the weakened economy.