Northern Europe economy predictions

There’s no clear definition of Northern Europe, but it loosely refers to countries including the UK, France, Germany, Netherlands, Ireland, Denmark, Norway, Sweden, Finland, etc. These are also the largest economies in Europe, which is why economic data from the region can be used to gauge economic performance of the entire European continent. To do so, we can classify the Northern Europe countries by performance, from the exemplary to poor.

Northern Europe

Best performing economies in Northern Europe

Ireland is still the best performing economy in the EU, with a 5.2% annual GDP growth in 2016 YoY. This number is actually a drop from 2015’s 26.3% GDP growth rate, but that was because of companies relocating to Ireland for their lower taxes. That was Ireland’s strategy to boost the economy following the post 2008 recession after the financial crisis. Nevertheless, it represents some solid growth. Another noteworthy economy is that of Iceland with 7.2% GDP growth in 2016 which was an improvement from 2015’s 4.1% growth.

Growing economies in Northern Europe

Most of the remaining Northern Europe economies fall into this category by showing gradual growth since the recession. Germany had a 1.9% GDP growth rate in 2016, and kicked off 2017 with 0.6% growth in the first quarter.

Slowing economies

The UK’s GDP growth perhaps shrivelled the most in 2016 following the Brexit vote, and the decline is expected to continue through 2017 and 2018. There were other slowing economies in the region, but most only experienced a slight decline.

Economic predictions for 2017 and beyond

A report by the European Commission combined with the data from shows that they expect economic growth in all EU member states this year. Even further growth is expected in 2018, which is very positive news. In Northern Europe, particularly, growth is expected to rise at a faster pace since there is increasing economic activity and decreased uncertainty.

The main driver for the Northern Europe economies will be increased domestic consumption. Unemployment is decreasing in the area while nominal wages are going up mainly led by foreign investment. Core inflation is also rising, which is helping to boost the economy.

On the other hand, increasing fiscal stimulus in the US and higher interest rates could entice investors away from Northern Europe. This is why GDP growth in most Northern Europe countries is expected to dip slightly in 2017. In Germany, for example, projected GDP growth is expected to drop to 1.6% in 2017, before picking up again in 2018 to 1.8%. The same is true for the UK, with an expected drop to 1.5% this year from 2.0% in 2016, Finland from 1.5% to 1.2% and Sweden from 3.3% to 2.4%.

However, some countries in the region should expect further economic growth this year such as France with an increase in GDP from 1.2% in 2016 to 1.4% this year. Belgium should also have an increase from 1.2% to 1.4%. Overall, though, economic growth is slowing in 2017 mainly due to the economic policies of the US, at least in 2017. 2018 is probably going to bring more economic growth to the region.

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