© Reuters. People walk at Karl Johans street in Oslo© Reuters. People walk at Karl Johans street in Oslo

By Camilla Knudsen

OSLO (Reuters) – Scandinavia’s economies are growing more rapidly this year than they were expected to just three months ago, but growth in Sweden and Denmark is still forecast to slow in 2018, according to a Reuters poll of economists published on Thursday.

Ultra-loose monetary policy, rising government spending and stronger European growth have all helped boost the economic prospects of Sweden, Denmark and Norway. Consensus forecasts for this year and next were raised for all three economies.

“The main picture is that growth is on the way up in the Nordic countries, the situation is better than expected,” Nordea Markets economist Erik Bruce said.

“Sweden is clearly in the leading position, but Denmark also sees good growth this year, and the same goes for Norway, which is on the way up after the oil downturn,” he added.

Sweden, the region’s largest economy, is the top performer with 3.0 percent growth expected this year, well above the 2.6 percent forecast in a poll in August and significantly higher than the 2.3 percent predicted a year ago.

To help boost inflation, the Swedish central bank has run a negative benchmark interest rate since early 2015 and has a program of quantitative easing.

“Swedish growth is also helped by international growth, but in particular by the extremely low rate level, which causes concerns for overheating. The expansive monetary policy could result in problems with overheating,” Bruce said.

The central bank last month rejected calls for policy tightening, however, arguing a recent uptick in inflation was fragile.

Forecasts for Danish growth this year were upgraded to 2.3 percent from 1.9 percent, while the outlook for 2018 was raised to 1.8 percent from 1.7 percent.

“For Denmark it is clearly the upswing in the euro zone that supports growth, in combination with low interest rates,” Nordea’s Bruce said.

In Norway, Western Europe’s biggest oil producer, growth of 1.9 percent was forecast for 2017 and 2.1 percent for 2018, up from earlier forecasts of 1.6 percent and 1.8 percent for the two years respectively.

(Polling by Indradip Ghosh and Manjul Paul; Writing by Terje Solsvik; Editing by Larry King)

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