Nordea's Macro View

Despite the war in the Middle East, higher energy prices, continued tensions in international trade, and tighter financial conditions, there is fortunately no indication that the global economy is heading into a significant slowdown. This remarkable resilience is due in part to substantial investments in artificial intelligence, the defence industry, and the green and digital transition — investments that are expected to increase further in the coming years, not least in Europe.

Against this backdrop, growth expectations have also been revised slightly upward in most of the autumn forecasts currently being published by banks, ministries, central banks, and international organisations. There appears to be broad consensus that global economic growth both this year and next will be around 3%, or close to trend growth. However, there is also agreement that there is considerable uncertainty surrounding the outcome. This is due not least to the fragile geopolitical situation.

The conflicts in the Middle East and Ukraine weigh most heavily, but they do not stand alone. We need only look at China's ambitions regarding Taiwan, Argentina's renewed claim to the Falkland Islands, and the now hopefully resolved situation surrounding Greenland to understand that geopolitics has taken on a new and different role in shaping the economic outlook than has been the case for many years.

In the current situation, the blockade of the Strait of Hormuz and military actions targeting shipping in the Red Sea and oil facilities in the affected countries have an immediate impact in the form of longer delivery times, rising freight rates, and significantly higher energy and commodity prices. This increases cost pressures on businesses and hits households in the wallet. Added to this are the consequences of the drought that struck Europe over the summer, which further increases pressure on consumer prices.