Danske Bank, one of the largest financial enterprises in the region, released a Nordic outlook report on Thursday that indicates that the Danish economy is performing better than that of its Scandinavian neighbours.
Danske Bank argues that falling oil prices and deflation could affect Scandinavian economies which previously managed to weather the storm of the global banking crisis much better than many of their European neighbours.
"The Nordic countries have been looking strong in recent years, with economic and financial crisis in much of Europe… However, after years of robust growth, the shine seems to be wearing a bit off," said economists led by Steen Bocian in a report from the Danish bank out Thursday.
The report also noted that Finland had been hit by the recession in Russia, linked to the ongoing unrest in Ukraine.
In Denmark, however, Danske Bank said that the “economy seems to be slowly moving in the right direction”.
“GDP growth was positive in Denmark in 2014 – the first year of positive growth rates since 2011. Danish house prices are increasing and consumption seems to be picking up and in the forecast period should continue to be supported by the significant drop in oil prices,” the report reads.
While Norway is being hard hit by rapidly falling global oil prices, Danske Bank said that the price decline will actually boost Denmark’s economic growth by up to 0.4 percentage points.
But while Danske Bank says that lower oil prices can help the Danish economy, they may wreck havoc on the government’s budget, which is built upon Denmark’s ability to sell North Sea oil at $110 dollars per barrel in 2015. On Friday, oil prices had fallen below $50 per barrel.
Denmark has seen positive GDP growth for five consecutive quarters, putting it just one quarter away from an official recovery.
Danske Bank said that Danes’ private consumption would be “the main driver of economic growth in the coming years” and predicted 1.6 percent economic growth in 2015 and 2.0 percent growth in 2016. The bank's 2015 prediction was just slightly below that of the European Commission, which predicted 1.7 percent growth.
Although growth in both Sweden and Norway has slowed in recent months, the bank's outlook still predicted 1.7 percent and 1.8 percent growth in those countries for 2015, respectively.
"This does not mean that there are signs of economic crisis in the two otherwise very strong economies, but growth rates are heading towards the European average and downside risks have increased," the report reads.
Danske Bank's Nordic Outlook report can be read here.