Nordic Outlook: It will soon be time to phase out "monetary
insurance"
(Thomson Reuters ONE) - Crisis policies are beginning to have an impact, in the form ofgreater stability in the world economy. Due to growing risk appetiteand better-functioning credit markets, the effectiveness of suchpolicies is increasing. Looking ahead, economic policymakers face thedual challenge of ensuring continued momentum towards recovery, whileavoiding new financial bubbles and excesses. This means that the"monetary insurance" against collapse taken out during the past yearin the form of extraordinary key interest rate cuts and liquidityinjections will soon start to be phased out. Central banks will hikekey rates in 2010 and 2011 despite historically low inflation andwage pressure, high unemployment and below-trend growth.Sweden's Riksbank is no exception. It will raise its repo rate to 2per cent late in 2010 and to 3 per cent during 2011. This impliesthat monetary policy will still remain expansive. Swedish GDP growthwill reach 1.7 per cent in 2010 and 2.6 per cent in 2011; inflationwill be kept down by low resource utilisation and historically lowpay increases; unemployment will climb to 11 per cent during 2010,then decline slowly. The government will add another SEK 25 billionin fiscal stimulus in its autumn budget. The budget will be expansivein 2011 as well, regardless of whether the non-socialist Alliancestays in power or a left-leaning government takes over after theSeptember 2010 election. The public opinion situation adds extrauncertainty about the formation of a new government and thus aboutthe economic policy climate after 2010, SEB's economists write in thelatest issue of Nordic Outlook."The prospects for economic growth have clearly improved, compared tothe severe crisis situation this past winter. Greater stability willlay the groundwork for decent growth," says Robert Bergqvist, ChiefEconomist at SEB. "Inventory build-up and short-term stimulusmeasures will lead to a positive rebound in economic growth in thenext six months. Uncertainty about household consumption andcorporate capital spending create doubts about the strength andsustainability of this growth," Mr Bergqvist says."The global banking system needs more time to normalise andconsolidate," he continues. "Credit supply is now functioningsatisfactorily with the help of the securities market, but the systemseems to be relying on hopes of a long-lasting government presenceand on the central banks as holders of credit risk. This means thatrisk-taking is being incorrectly priced, thereby increasing thehazards of inefficient credit allocation and new imbalances. It is achallenge to central banks and will accelerate their interest ratehikes," Mr Bergqvist concludes.The way that economists have viewed inflation has varied over thepast year - from an oil price shock and fears of inflation in thesummer of 2008 to deflation worries during the winter and subsequentconcerns that inflation would be triggered by expansive monetarypolicies. These changes have led to large movements in the fixedincome market."Resource utilisation remains low, and unemployment is high. Globalwage and salary growth is falling significantly, which will help keepinflation low in 2010 and 2011," says Håkan Frisén, SEB's Head ofEconomic Research and editor in chief of Nordic Outlook. "Cyclicalforces will improve productivity, leading to lower cost pressure forcompanies and enabling households to maintain their purchasing power.We believe that interest rates will behave more calmly in the comingmonths, with long-term yields continuing upward a bit and thenfalling somewhat in 2010," Mr Frisén says.The American consumer has faced tough challenges in recent years.Short-term federal stimulus measures have been enacted. As a resultthe US economy has stopped declining, and economic growth isimproving."We expect a rebound in US growth during the second half of 2009 withthe help of inventory effects, targeted measures aimed at boostingconsumption such as the 'cash for clunkers' auto rebates andsubsidies to young first-time buyers in the real estate market," saysMattias Bruér, US analyst at SEB Economic Research. "Our analysis ofhistorical turning points shows that households play a pivotal rolein economic recovery. This time around, there is very greatuncertainty. Households have begun saving money and are expected toboost their savings ratio another couple of percentage points as aconsequence of earlier home price declines and the continued rise inunemployment. This clouds the future economic outlook," Mr Bruérsays.The German economy will play a key role for the economic recovery inEurope."Germany was exceptionally hard hit by the industrial downturn lastwinter," says Tomas Lindström, euro zone analyst at SEB EconomicResearch. "But today we can see some bright spots, and the reboundmay be stronger than in many other countries once the recovery takesoff. Meanwhile there are euro zone countries that are still severelyaffected by the financial and housing crisis. This shows what adifficult situation the European Central Bank is in when it comes tochoosing the right time to begin its rate-hiking cycle," Mr Lindströmsays.The outlook for the Swedish economy has improved."Sweden has a good starting position. The manufacturing sector maybenefit from the international upturn and a weak krona, while thecentral government and the private sector have strong balancesheets," says Håkan Frisén. "Swedish mortgage interest rates are verylow in international terms, which may explain why home prices inSweden have not fallen as in other countries. Today many householdshave floating-rate loans, which make the Riksbank's interest rateweapon extra powerful. On the other hand, this also implies risksthat we will experience negative effects in the housing market at alater stage than other countries, as interest rate hikes begin."Key figures: International and Swedish economy+-------------------------------------------------------------------+| International economy. GDP, | 2008 | 2009 | 2010 | 2011 || year-on-year change, % | | | | ||-------------------------------------+-------+-------+------+------|| United States | 0.4 | -2.5 | 1.8 | 2.3 ||-------------------------------------+-------+-------+------+------|| Euro zone | 0.6 | -3.9 | 1.2 | 1.8 ||-------------------------------------+-------+-------+------+------|| Japan | -0.7 | -5.6 | 1.5 | 1.9 ||-------------------------------------+-------+-------+------+------|| OECD countries | 0.6 | -3.9 | 1.3 | 1.9 ||-------------------------------------+-------+-------+------+------|| China | 9.0 | 8.0 | 8.0 | 8.0 ||-------------------------------------+-------+-------+------+------|| Baltic countries | -1.0 | -15.6 | -2.6 | 3.2 ||-------------------------------------+-------+-------+------+------|| The world | 3.1 | -0.9 | 3.4 | 4.1 ||-------------------------------------+-------+-------+------+------|| Swedish economy. Year-on-year | 2008 | 2009 | 2010 | 2011 || changes, % | | | | ||-------------------------------------+-------+-------+------+------|| GDP, working day adjusted | -0.5 | -4.9 | 1.7 | 2.6 ||-------------------------------------+-------+-------+------+------|| BNP, actual | -0.2 | -5.0 | 2.0 | 2.6 ||-------------------------------------+-------+-------+------+------|| Unemployment, % (EU definition) | 6.2 | 8.4 | 10.5 | 10.7 ||-------------------------------------+-------+-------+------+------|| Consumer Price Index (CPI) | 3.4 | -0.2 | 1.6 | 2.1 || inflation | | | | ||-------------------------------------+-------+-------+------+------|| Public sector financial balance, % | 2.5 | -2.6 | -4.0 | -3.9 || of GDP | | | | ||-------------------------------------+-------+-------+------+------|| Repo rate (December) | 2.00 | 0.25 | 2.00 | 3.00 ||-------------------------------------+-------+-------+------+------|| Exchange rate, EUR/SEK (December) | 10.92 | 9.75 | 9.50 | 9.30 |+-------------------------------------------------------------------+SEB is a Northern European financial group serving some 400,000corporate customers and institutions and five million privateindividuals. SEB offers universal banking services in Sweden, Germanyand the three Baltic countries - Estonia, Latvia and Lithuania. Italso has a local presence in the other Nordic countries, Poland,Ukraine and Russia and a global presence through its internationalnetwork in another ten countries. On June 30, 2009, the Group's totalassets amounted to SEK 2,374 billion and its assets under managementtotalled SEK 1,267 billion. The SEB Group has about 20,500 employees.Read more about SEB at www.sebgroup.com._____________________________________________For further information, please contact:Robert Bergqvist, +46 70 445 1404 Mattias Bruér, +46 8 763 8506Håkan Frisén, +46 70 763 8067 Mikael Johansson, +46 8 763 8093Tomas Lindström, +46 8 763 8028 Olle Holmgren, +46 8 763 8079Elisabeth Lennhede, Press & PR, +46 70 763 99 16,elisabeth.lennhede(at)seb.sehttp://hugin.info/1208/R/1338473/319350.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 01.09.2009 - 09:00 Uhr
Sprache: Deutsch
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