Swedish economy slowing, still outshines Nordic neighbors

October 18, 2016 6:56 AM EDT

A general view shows Stockholm January 17, 2013. REUTERS/Ints Kalnins


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STOCKHOLM (Reuters) - Sweden's economic growth will slow this year and next after expanding strongly in 2015 but it should continue to outpace its Scandinavian neighbors Norway and Denmark, a Reuters poll found on Tuesday.

The Nordic region's biggest economy is expected to grow a healthy 3.1 percent in 2016 after gross domestic product expanded 4.2 percent in 2015, according to the survey of 23 economists taken in the past week.

"Domestic demand is driving the economy, but the rest of the world is not helping," Swedbank chief economist Anna Breman said. "If household consumption keeps slowing, we are heading towards growth in the longer term of around 2 percent."

Negative interest rates and a chunky 245 billion crown ($28.5 billion) asset purchase program have helped boost asset prices and consumption. The government also opened its coffers to meet the challenge of record high immigration last year.

But weaker global demand has hurt exports, despite a 5 percent fall in the value of the crown this year.

Analysts trimmed forecasts from the previous poll, with 2017 growth now seen easing further, to 2.3 percent, compared with 2.4 percent in the previous poll.

In oil-producing Norway, lower interest rates and a sharply weaker crown currency have made non-oil exporters more competitive, while expansive fiscal policies and strong growth in construction have helped boost domestic demand.

Economists in the poll expect the Norwegian economy to expand 0.9 percent this year and 1.5 percent next, unchanged from August.

"I believe the worst is over. Lower Norwegian growth was triggered by a fall in oil investments, much of which is in the past, although remnants of it will continue to dampen activity also next year," DNB Markets economist Kyrre Aamdal said.

"We believe in a modest upturn next year."

In Denmark, which has pegged itself to the euro to achieve long-term stability, growth is seen at 1.0 percent in 2016, picking up to 1.5 percent the following year.

The economy grew 1.0 percent in 2015.

The forecasts were unchanged from August.

"Unlike Sweden and Norway, Denmark never caught up with losses after the financial crisis," said Steen Bocian. chief economist at the Confederation of Danish Enterprise.

A return to Denmark's roughly 2 percent long-term historical growth rate remains far off, Bocian said.

In August, the Danish government presented a package of reforms, including tax cuts and a hike in the pension age, to boost growth and push up productivity, seen as the main reason for low growth.

(For other stories from the global poll:)

($1 = 8.6231 Swedish crowns)

(Reporting by Johan Sennero, Camilla Knudsen and Annabella Pultz Nielsen; Editing by Catherine Evans)



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