The near-term economic outlook has deteriorated in recent months and Switzerland, Sweden, and Denmark are set for mild recessions in late 2022 and early 2023. This is partly a function of external weakness; as highly open economies, the recession in the key trading partner of the euro-zone that we forecast later this year will take a toll on exports. But domestic activity will also be constrained by a combination of rising interest rates and related weakness in the housing market and residential investment. This is particularly the case in Norway and Sweden where a large share of mortgages are on floating interest rates and we expect policymakers to front-load tightening efforts this year.
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