The Nordic countries have been benefiting from a strengthening global recovery, but that is now changing. The recovery is maturing in Europe and in the US, and we are closer to the point where growth will have to go down a notch due to the capacity constraints in the economy. We expect global growth to decline next year, although to a level that is still in recovery territory, supported by even more expansionary fiscal policy in the US and only slight monetary tightening in Europe. In addition, there are many risks to global growth, including the trade war, Brexit and political uncertainty in Italy.
The Brexit negotiations are proving to be difficult and there is a risk that the EU and the UK cannot reach an agreement. In that case, Nordic exporters would be likely to face tariffs on their UK exports and all Nordic countries have a surplus against the UK in goods (but a deficit in services). Norway has the most exports, but 80% of that is oil and gas, which face only 2.5% tariffs under WTO rules. In contrast, Denmarks substantial food exports could face tariffs of 15.5-35.9%. However, the total value of agricultural exports to the UK is only 0.46% of Danish GDP. The UK is not as important as it once was to the Nordics and we do not expect a major economic impact.
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