HSBC says Sweden and Norway will outperform rest of developed world

While much of Europe returned to lockdown measures over the past month in a bid to curb the resurgence of coronavirus outbreaks, the continent’s northernmost tip is expected to continue to outperform until 2021, according to HSBC.

Sweden and Norway recorded a better-than-expected recovery in the third quarter, with GDP (gross domestic product) growth of 4.3% and 5.2% respectively after the crisis of the second quarter at the height of the crisis. coronavirus.

Along with the positive vaccine news sparking optimism for a global economic recovery in 2021, HSBC global economist James Pomeroy said in a research note on Monday that the degree of budget support available in the two countries offered a more optimistic outlook than the rest of the developed world. .

“Like much of the world, the Scandinavian economies saw a strong rebound in the third quarter of 2020. Growth rates may not look as strong as elsewhere in the world on a quarterly basis, but the annual declines are smaller than those of most developed economies, ”Pomeroy said.

Both economies have tightened restrictions over the past month, despite Sweden’s previous skeptical stance on lockdowns. While not quite as strict as measures taken elsewhere on the continent, Swedish Prime Minister Stefan Lofven urged the public to avoid gyms, libraries and restaurants and reduce the limit for public gatherings from 50 to eight.

“This will clearly mean headwinds for consumption in the second half of the fourth quarter – and therefore we have reduced our growth forecast for the quarter to -1.7% (from + 1.4%),” Pomeroy said.

Norway has fared slightly better, with fewer than 70 deaths from Covid-19 since July, while the 5.2% GDP rebound after the 6% contraction in the second quarter leaves the economy on solid ground more solid than in much of the continent.

“Based on monthly GDP data, in September the economy was only 2.2% smaller than at the end of 2019. However, after COVID-19 cases resumed in early November, the government has chosen to post as little social contact as possible “to combat the epidemic,” Pomeroy said.

“The slowdown in consumption in the second half of Q4 will probably translate into a negative impression here too (we are looking for -1.1% qoq, against + 1.4% previously). However, due to a better than expected Q3, our 2020 forecast is unchanged at -3.9%. “

The potential vaccine rollout is expected to facilitate a strong rebound in 2021, and Pomeroy suggested that the ‘huge’ fiscal space available for Sweden and Norway would continue to be rolled out, with both countries having supported business and revenue until in 2020, limiting scarring. compared to other developed economies.

“On top of that, the 2021 budgets aim to invest in new growth avenues, such as the green economy, and to create more jobs in new industries,” Pomeroy said.

“The ability to fund this transition means the region is expected to outperform the rest of the developed world, even after a November setback.”