In early April when the US administration communicated its reciprocal tariffs, shock waves hit the global economy. Trump’s tariffs and the related uncertainty on policy will hit the US economy and inevitably also weigh on the global economy. We have revised the growth outlook down for the US, China and the euro area. European growth will, however, hold up decently, partly due to the expansion of defence spending.
As the global outlook becomes somewhat bleaker due to trade tensions, we are also lowering GDP growth forecasts for the Baltics by 0.2–0.7 percentage points for this year and next.
Moreover, as the year began, inflation accelerated more than expected; this is likely to dent the recovery of household consumption. Nevertheless, falling interest rates, ample credit supply and fiscal stimulus are likely to boost both public and private investments. All three Baltic countries plan to increase defence spending to 4-5% of GDP in 2026.
