The Nordic economies were recovering well post-pandemic as covid restrictions were removed. Growth has been strong and the increased demand for labour has seen low unemployment and even some labour shortages in key sectors.
The Russian invasion of Ukraine has started to put the brakes on that recovery. It has been pushing up energy prices and to a lesser extent food and other commodity prices.
This supply led inflation is not being matched by a rise in wages. It will cause a real reduction in purchasing power, at least in the short term.
There are clear signals that interest rates are on the way up
The average consumer is however in a reasonable place with a strong job market and historically high levels of savings. This will be providing some cushion against current uncertainties.
With the exception of Finland and its strong trading ties to Russia, all Nordic countries are relatively well placed compared to their European counterparts.
We concur with the Danske Bank base case that the war in Ukraine will continue this year but will not expand outside Ukraine.
So what is this scenario likely to mean for the Nordic outbound travel market.
We think Summer 22 will bring some good news for the travel industry with the recovery of international travel remaining strong
Geopolitical uncertainty is never good for international travel. This will undoubtedly cause some people to holiday at home. But it is pent up demand for wider travel post-pandemic and most still intend to travel internationally this year, funding trips both from current income and savings.
The prices of overseas holidays may be higher than anticipated. Mostly not least because of increased fuel costs, but the currently expected increases will not deter travellers who have foregone such holidays for the past two years.
For travel beyond this summer, we are still optimistic that the recovery will continue. We do think that the current headwinds may cause travel decisions to be delayed until closer to planned departure dates.
Of course, that could all change if things play out differently in Ukraine.
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