The economic outlook for the Nordics and Baltics reflects a mixed but still resilient trajectory. While the global economy entered 2026 with a strong cyclical position, geopolitical developments—particularly the energy shock driven by the Middle East conflict—are now weighing on growth prospects. Higher energy prices are expected to temporarily lift inflation and dampen consumption, while still-beneficial labour market conditions and investment activity provide underlying support.
Overall, growth expectations have been revised slightly downwards compared to earlier in the year, but recession risks remain limited in the base scenario. Domestic demand, real income development, and policy responses will be key drivers shaping economic performance across the region.
Let us take a closer look at each country.
Denmark
Denmark is transitioning towards more broad-based growth after a period dominated by export-driven expansion, particularly from the pharmaceutical sector. Going forward, growth is expected to increasingly be supported by domestic demand, as real wages rise and consumer confidence gradually improves. The year-on-year percentage change in GDP is currently 2.0 per cent.
Despite strong underlying fundamentals, the Danish economy continues to face structural imbalances, including a heavy reliance on the pharmaceutical sector and high household savings, which create uncertainty around the strength of domestic demand.
Consumer Spending
Private consumption is expected to pick up as disposable incomes increase, supported by low inflation, tax reductions, and rising wages. However, a key uncertainty remains households’ willingness to spend accumulated savings, which could significantly influence the strength of consumption growth.
Labour Market
The labour market remains stable, with unemployment expected to remain low despite modest increases driven partly by structural adjustments. Wage growth is expected to remain moderate, supporting real income gains without creating significant inflationary pressure.
Sweden
Sweden’s economic outlook remains relatively strong, although short-term growth momentum has softened. Domestic demand is increasingly important, supported by rising real incomes, low inflation, and fiscal stimulus, even as geopolitical uncertainty dampens overall sentiment.
Growth prospects remain among the strongest in the Nordics, despite recent revisions reflecting weaker near-term conditions. That said, the year-on-year percentage change in GDP is anticipated to be at 2.6 per cent, which is higher than in other Nordic countries.
Consumer Spending
Households are central to Sweden’s growth outlook. Household consumption is expected to increase by 2.7 per cent this year, up from 1.7 per cent in 2025. While consumption weakened at the start of 2026, rising real disposable incomes, driven by wage growth and low inflation, are expected to support a recovery. However, wage growth is slowing.
Still, elevated energy costs and weak consumer confidence create downside risks, illustrating a continued gap between improving fundamentals and cautious household behaviour.
Labour Market
The labour market shows small, gradual signs of improvement, with declining unemployment trends and expected strengthening over time. However, recovery appears somewhat delayed.
Norway
Norway’s economy is entering a period of moderate growth supported by consumption and investment, but constrained by persistent inflationary pressures and tighter monetary conditions. The latest data indicate that GDP growth will be at 1.2 per cent in 2026, a minor increase compared to 2025.
Higher energy prices improve terms of trade but do not fundamentally alter the growth outlook, as the economy transitions away from oil-driven expansion.
Consumer Spending
Private consumption remains supported by real wage growth, but household behaviour is becoming more cautious due to slightly increased inflation and the prospect of prolonged higher interest rates. This is expected to result in a higher savings ratio and reduced consumption growth. It should be emphasised that there is high wage growth, exceeding 5 per cent since 2023.
Labour Market
The labour market remains relatively tight with stable employment, although some indicators suggest moderation. Unemployment is expected to remain low, at 4.5 per cent, before declining to 4.4 per cent in 2027.
Finland
Finland is showing signs of recovery after a prolonged period of weak growth. Economic expansion is expected to gradually accelerate, driven by improvements in domestic demand, industrial activity, and exports.
However, the recovery remains fragile, with high unemployment and slower productivity growth continuing to weigh on the outlook.
Consumer Spending
Private consumption is expected to increase as real incomes rise and the savings rate declines. Improving household confidence, supported by higher wages and falling inflation, is set to gradually strengthen demand.
Labour Market
The labour market remains weak relative to other Nordic countries, with high unemployment levels expected to decline only gradually. Improvements in employment are closely tied to industrial activity and broader economic recovery.
Lithuania
Lithuania continues to stand out as one of the stronger-performing Baltic economies, supported by robust domestic demand and export activity. Growth remains relatively high with GDP growth of 3.2 per cent in 2026. When comparing with regional peers, it is also good, although the expected acceleration in consumption has been gradual. Even though export growth will slow in 2026, the economy is set to grow.
Consumer Spending
Household consumption is expected to increase further in 2026. Despite inflation increasing, the growth in wages and salaries is higher than the inflation, ensuring the consumers have more disposable income. In recent years, we have seen how monthly earnings have continued to increase, indicating that the businesses and economy as a whole are improving.
Labour Market
Labour market conditions remain supportive, with stable employment trends and positive wage dynamics supporting economic resilience. The unemployment rate is set to decrease to 6.8 per cent in 2026 and is expected to remain at that level through 2027. In the first quarter of 2026, the number of employed people saw a small increase.
Latvia
Latvia’s recovery is driven primarily by investment activity, while consumption remains somewhat restrained. Growth is expected to strengthen moderately over the coming years, with GDP growth in 2026 anticipated to be 2.2 per cent, increasing to 2.4 per cent in 2027.
Considering the fact that GDP growth in Latvia back in 2024 was 0.0 per cent, and it has now increased to 2.2 per cent, it is certainly an economy in development, benefiting consumption and the labour market.
Consumer Spending
Household consumption is set to improve, along with consumer confidence and a stronger labour market. In fact, the consumption is set to positively affect the GDP growth of Latvia, reflecting the impact of inflation and limited confidence. However, improving real wages and easing inflation are expected to support gradual recovery.
Labour Market
The labour market is improving, with declining unemployment driven by rising economic activity and stronger employment dynamics. In 2025, the unemployment rate was approximately 6.9 per cent, and it is set to decrease to 6.5 per cent in 2026, before decreasing even further in 2027 to 6.2 per cent. As such, the decline will continue in a somewhat slow pace.
Estonia
Estonia is emerging from a period of contraction and entering a phase of moderate recovery. GDP growth remains modest at 2.5 per cent in 2026, up from 0.6 per cent in 2025. Growth is expected to strengthen gradually as external demand improves.
Consumer Spending
Consumption is recovering slowly despite persistent inflation. Household consumption is set to increase by 2.6 per cent in 2026, up from -0.1 per cent in 2025. Lower income taxes will benefit consumer spending, along with stable wage growth and a resilient labour market, which are expected to support further improvement. Finally, it is noted that consumer confidence has improved lately, which should support consumption as well.
Labour Market
Though unemployment remains slightly higher than in Lithuania and Latvia, it is expected to fall from around 7.6 per cent to 6.1 per cent by 2027. Improvements in labour conditions, specifically the real wage growth, which is the strongest seen in recent years, will be central to supporting household spending and broader economic recovery.
Concluding remarks
The economic outlook for the Nordics and Baltics reflects a stable but more uncertain growth environment compared to earlier in the year.
Resilience remains intact, supported by strong labour markets, rising real incomes, and investment activity
Short-term headwinds have increased, primarily driven by higher energy prices and geopolitical uncertainty
Consumer behaviour remains cautious, delaying the full translation of improved fundamentals into stronger demand
The Nordics continue to exhibit divergent recovery paths, with Sweden and Denmark showing stronger domestic demand dynamics, Norway balancing inflationary pressures, and Finland gradually stabilising.
Meanwhile, the Baltics maintain a relatively higher growth trajectory, supported by investment and improving consumption, although momentum varies across countries.
Overall, the region remains on a moderate growth path, with upside potential linked to improving consumer confidence and downside risks tied to prolonged geopolitical and energy-related disruptions.
