September 30th 2026

The Nordic and Baltic economies continue to demonstrate resilience despite a challenging external environment characterised by higher energy prices, geopolitical uncertainty and ongoing disruptions to global trade flows. Encouragingly, growth across much of the region is being supported by a combination of stronger household purchasing power, AI-related investment, defence spending and a gradual recovery in global manufacturing demand. However, the outlook remains uneven across countries and sectors, with labour market conditions, consumer confidence and exposure to external trade shaping different growth trajectories.

The most significant regional theme is the emergence of new sources of growth. While higher energy costs continue to weigh on households and selected industries, investment linked to artificial intelligence, energy infrastructure, defence and digitalisation is helping to offset these headwinds. At the same time, inflation remains above historical norms in several countries, although wage growth is generally protecting household purchasing power. Risks remain centred on energy markets, geopolitical developments and the possibility of prolonged supply disruptions.

Let us take a closer look at each country.

The Nordics

Denmark

Denmark continues to report exceptionally strong headline growth, but the figures somewhat overstate the underlying strength of the domestic economy. GDP growth is expected to reach around 3.5 to 4.0 per cent in 2026 before moderating towards 2.5 to 3.0 per cent in 2027 as pharmaceutical exports normalise and growth becomes more broadly based. Growth is increasingly being supported by domestic demand alongside exports, excluding pharmaceuticals.

The outlook is supported by a mildly expansionary fiscal stance, higher defence spending and tax reductions. Investment activity is expected to recover during the forecast horizon, particularly in housing construction and machinery investment as broader business activity strengthens.

Consumer Spending

Household consumption is gradually strengthening. Real wage growth, rising employment and significant increases in house prices are improving household balance sheets. Consumption growth is expected to strengthen towards around 3 per cent in 2027 and beyond. However, Danish households continue to save at historically high rates, suggesting substantial upside potential should confidence improve further.

Inflation remains relatively moderate. Both Danske Bank and SEB expect inflation around 1.5 to 1.7 per cent during 2026 before rising modestly towards 2 per cent in 2027. Higher energy costs are exerting pressure, but strong income growth continues to support purchasing power.

Labour Market

The labour market remains robust, though somewhat less tight than in previous years. Employment continues to increase while labour force growth has accelerated due to immigration and higher participation rates. This has led to a modest rise in unemployment. Most forecasts point to unemployment remaining low by historical standards despite some short-term increase.

Wage growth remains healthy, supporting household incomes and consumption. While signs of overheating have faded, the labour market continues to underpin domestic demand and economic resilience.

Sweden

Sweden has emerged as one of the Nordic success stories in 2026. Economic activity has accelerated more rapidly than anticipated, and GDP growth is projected to reach approximately 2.7 to 2.8 per cent in 2026, followed by around 2.5 to 2.9 per cent in 2027. Growth is increasingly balanced between exports, investment and consumption.

Strong performance within defence industries, pharmaceuticals, information technology and AI-related infrastructure investment is supporting growth. Resource utilisation is returning toward normal levels, and economic momentum appears well established

Consumer Spending

Household purchasing power has improved significantly thanks to stronger wage growth, lower inflation, and temporary fiscal support measures. Consumption growth is expected to remain near 3 per cent annually through 2027. Housing market activity remains high and household confidence is gradually improving, although sentiment indicators still lag actual spending behaviour.

Inflation remains a key area of concern. While inflation remains relatively moderate, food prices, supply disruptions, higher energy costs and a weaker krona present risks going forward.

Labour Market

The labour market remains cautious but is gradually improving. Employment growth has been slower than expected, yet unemployment is forecast to decline from around 8.6 per cent towards below 8 per cent as economic activity strengthens. Labour force growth is expected to remain limited, making it easier for unemployment to fall once hiring resumes.

Wage growth around 3.5 per cent continues to support real incomes without generating broad inflationary pressures. The labour market should become a stronger contributor to growth during 2027.

Norway

Norway continues to operate below trend growth as higher interest rates restrain domestic demand. Mainland GDP growth is expected to remain around 1.0 to 1.2 per cent in 2026 before strengthening modestly during 2027. Economic activity remains uneven, with rate-sensitive sectors experiencing greater challenges.

Public demand, infrastructure investment and energy-sector spending continue to support the economy, but residential investment remains weak and petroleum investment appears to have passed its peak.

Consumer Spending

Consumption remains positive but relatively subdued. Higher interest rates and elevated household debt continue to constrain spending, although strong wage growth and low unemployment are helping households absorb these pressures. Consumption is expected to strengthen further as inflation moderates.

Inflation has fallen more quickly than expected during the summer, reducing risks of further monetary tightening. Energy prices remain the principal uncertainty for households and businesses alike.

Labour Market

The labour market remains comparatively tight by international standards, although indicators have softened. Vacancy numbers have declined and unemployment has edged higher. Both labour supply and demand appear to be normalising gradually.

Wage growth remains elevated but is expected to slow gradually from recent peaks as productivity growth remains subdued and inflation pressures ease.

Finland

Finland has delivered one of the strongest surprises in the Nordic region. GDP growth has exceeded expectations during the first half of the year, prompting substantial upward revisions. Growth of approximately 1.6 to 1.8 per cent is now expected during 2026, followed by around 1.4 per cent during 2027.

The recovery is supported by private consumption, stronger exports, defence investments, data-centre development and a broader global investment cycle which is benefiting Finnish manufacturing. Nevertheless, the housing sector remains weak.

Consumer Spending

Private consumption has returned to growth as purchasing power improves and households reduce precautionary savings. Wage growth continues to exceed inflation, supporting real incomes despite higher energy costs. Tax reductions are also providing temporary support.

Consumer confidence has improved, although significant differences remain between higher- and lower-income households. Future spending growth will depend heavily on labour market developments.

Labour Market

The labour market remains Finland’s weakest area. Unemployment remains elevated at around 10 per cent and hiring demand is still low despite stronger economic activity. However, stabilisation is increasingly visible and a gradual improvement is expected throughout 2027.

Growth in exports and business activity should slowly translate into stronger labour demand, although the improvement is expected to be measured rather than rapid.

The Baltics

Lithuania

Lithuania remains one of the fastest-growing economies in the Baltics. GDP growth is expected to reach about 3.0 per cent in 2026 before moderating in 2027 as the temporary boost from pension fund withdrawals fades.

Consumer Spending

Large withdrawals from second-pillar pension funds have provided a substantial boost to household spending and retail activity. Although growth in consumption is expected to slow, households continue to hold significant liquidity. Inflation is projected to reach around 5.3 per cent in 2026, making Lithuania the region’s highest-inflation economy.

Labour Market

The labour market remains tight and wage growth continues to exceed expectations, reaching roughly 8.5 per cent. Employment growth remains steady, although concerns around skill shortages and AI-related structural changes are increasing.

Latvia

Latvia’s economy continues to demonstrate resilience, with growth expected around 2.0 to 2.3 per cent during the forecast period. Investment and household consumption remain the principal contributors to activity.

Consumer Spending

Consumption growth has strengthened thanks to improving purchasing power, although households are expected to become somewhat more cautious as energy costs increase. Inflation remains elevated near 3.5 per cent.

Labour Market

The labour market remains relatively stable. However, wage growth has slowed materially compared with previous years, reducing the pace at which purchasing power improves. Unemployment is expected to decline only gradually.

Estonia

Following several difficult years, Estonia has returned to growth. GDP is expected to expand by approximately 2.5 per cent in 2026 and close to 3 per cent in 2027. Household consumption, investment and stronger export prospects are driving the recovery.

Consumer Spending

Tax reductions and lower inflation have improved household purchasing power, supporting a recovery in consumption. Inflation is expected to remain relatively contained near 2.5 to 3.0 per cent.

Labour Market

Employment remains high and the labour market is stable. Wage growth is expected to remain above 5 per cent, supporting demand while maintaining competitiveness.

Concluding remarks

Overall, the outlook remains cautiously positive. The region appears well placed to benefit from structural investment trends and improving real incomes, yet the balance between resilience and risk remains delicate. Continued moderation in inflation combined with sustained investment could deliver stronger growth than currently expected, while renewed energy disruptions or weaker global demand could quickly alter the trajectory