Nordic Outlook: Recovery while awaiting exit policy
(Thomson Reuters ONE) - Governments and central banks seem to be drawing a sigh of relief.The world is now catching its breath before the second lap of a toughlong-distance race. Exceptional stimulus measures have served as asuccessful counterweight to a powerful recession and credit crunch.We expect GDP growth in the 30 OECD countries to be close to theirtrend levels in 2010-2011. China is "guaranteeing" the world that itseconomy will grow at the 8-9 per cent target rate but needs continuedstimulus. Unemployment in most countries will peak in 6-9 months,earlier and at a lower level than in our September forecast. The riskof "printing press inflation" is being exaggerated. The United Statesand the euro zone will raise their key interest rates cautiously inthe autumn of 2010 from extremely low levels, once the risk picturehas become more symmetrical. But this does not mean the world is backto business as usual. Economic growth will not suffice to generatenew jobs at the desired pace, despite the impact of burgeoninggovernment debt and grotesquely large central bank balance sheets,which need to be reduced.Sweden is well-positioned both in the short and long term - strongfundamentals pay off. GDP growth will end up at 2.5 per cent in 2010and at 2.8 per cent in 2011 (in calendar-adjusted terms), somewhatabove trend, thanks to the government's stimulus measures and aneconomy that has been influenced to an especially high degree byultra-expansive monetary policy. Unemployment will level off ataround 10 per cent next summer. We expect collective pay agreementsof close to 2 per cent next year, which hardly poses any inflationarythreat - productivity will rebound. The Riksbank's interest ratepolicy will be influenced by future banking regulations and byadditional fiscal stimulus, which we expect regardless of thepolitical colour of the government that takes office after theSeptember 2010 election. The first repo rate hike will come in thespring, and we expect the key rate to be 2 per cent at the end of2010 and 3 per cent at the end of 2011. The low interest rateenvironment will thus persist."The effectiveness of expansive economic policies will be sufficientto provide positive global growth surprises in 2010," says HåkanFrisén, SEB's Head of Economic Research and editor in chief of NordicOutlook. "Granted that stock market curves, confidence indicators andinventory effects can be deceptive, but as long as stimulus policiesremain in place, the recovery is likely to continue, fuelled bycontinued optimism in financial markets.""But the recovery may still derail," says Robert Bergqvist, SEB'sChief Economist. "We still do not know how self-sustaining economicgrowth will be, beyond inventory effects and targeted governmentsupport. In 2011, growth risks will be on the downside. There isgreat uncertainty about the shape and impact of exit policies. Theneed to shrink super-sized government and private sector debts aroundthe world will also hobble economic performance. There is alsouncertainty about how changes in financial sector regulations willaffect lending by banks," Mr Bergqvist says.The unconventional policies of central banks are creating worriesabout monetary inflation, especially in an environment of growthcurves that are cautiously pointing upward again and of inflationpressure from commodities."Underlying inflation will continue downward in Europe and the US,driven by low resource utilisation, decelerating pay increases andrebounding productivity," says Tomas Lindström, monetary policyanalyst at SEB Economic Research. "The money supply circulating inthe real economy has not risen in the past year despite monetaryexpansion. And above-trend growth will be needed in order to boostinflation pressure. Inflation is low while asset prices are movingupward, which may soon pose a dilemma for central banks. This willincrease the pressure on central banks to focus more attention on therisk of new financial imbalances. But key interest rates willprobably not need to be raised especially much in order to have arestraining effect. Earlier estimates of neutral interest rates areprobably too high," Mr Lindström says.The US economy is under heavy strains, but large-scale stimuluspolicies are in place."We are admittedly seeing a cyclical bottom and greater stability inthe real economy and financial markets, but there are still majorproblems," says Mattias Bruér, US analyst at SEB Economic Research."Stimulus measures are contributing greatly to decent growth, butthis effect will fade. Unemployment will peak at 11 per cent, andthere is heavy downward pressure on wages and salaries. Meanwhilesmall banks are not yet on firm ground, which is hampering creditgrowth. The Federal Reserve is in no rush to raise its key interestrate - it will take the first step late next year," Mr Bruér says.Sweden may soon show a growth rate that is rather high in aninternational perspective."Strong fundamentals pay off, especially in the Nordic countries.Many countries must formulate exit strategies in the near future andtighten their belts to stop excessively rapid deterioration ingovernment finances. Here Sweden has a relatively good startingposition," says Daniel Bergvall, government finance analyst at SEBEconomic Research. "Unemployment will climb by 3.5 percentage points,which will of course have repercussions on central governmentfinances. But budget deficits will end up at 2.5 per cent of GDP bothin 2010 and 2011, which is a low level in international terms, andcentral government debt will increase to 'only' 40 per cent of GDP. Achange of government will not alter this forecast to any greatextent," Mr Bergvall says.Consumer Price Index (CPI) inflation in Sweden will increase somewhatover the next six months, but underlying price pressure will bepushed downward by such factors as historically low resourceutilisation, higher productivity, a stronger Swedish krona and anincreased likelihood of falling food prices."Although we are a little more optimistic about economic growth andthe labour market, we are not especially worried about inflation inSweden. Underlying inflation is admittedly a little higher in Swedenthan elsewhere, but this follows historical patterns rather well. Weexpect a correction as productivity and the krona exchange rate reachmore normal levels," says Håkan Frisén. "The Riksbank is actually inno hurry to raise its key interest rate, but our assessment is thatit will begin its rate hikes in the spring of 2010, that is, a littleearlier than the bank has so far indicated. A brighter economicpicture, including a more symmetrical risk scenario and increasinglyclear tendencies towards imbalances in the housing market, arereasons for beginning the process a bit earlier than most othercentral banks," Mr Frisén says.Group of 20 economists are now in the process of building the "newworld economic order" aimed at achieving more balance, stable globaleconomic and financial market performance in the future."It is important to monitor the work of the G20, especiallyconsidering Sweden's great dependence on international developments,"says Robert Bergqvist. "We are moving towards a globalisation ofeconomic policymaking and financial infrastructure. Politicalinfluences on the real economy and the financial system will increasein the future. There is a time line for how the G20 countries shouldwork together in the coming years. This is a very positivedevelopment, but large portions of the design for the new economicorder are still missing - of course this creates uncertainty aboutthe future rules of the game for households and companies," Bergqvistconcludes.Key figures: International and Swedish economy+-------------------------------------------------------------------+| International economy. GDP, | 2008 | 2009 | 2010 | 2011 || year-on-year change, % | | | | ||-------------------------------------+-------+-------+------+------|| United States | 0.4 | -2.5 | 3.0 | 2.2 ||-------------------------------------+-------+-------+------+------|| Euro zone | 0.6 | -3.9 | 1.8 | 2.1 ||-------------------------------------+-------+-------+------+------|| Japan | -0.7 | -5.0 | 1.8 | 2.1 ||-------------------------------------+-------+-------+------+------|| OECD countries | 0.6 | -3.5 | 2.3 | 2.4 ||-------------------------------------+-------+-------+------+------|| China | 9.0 | 8.5 | 9.0 | 9.0 ||-------------------------------------+-------+-------+------+------|| Baltic countries | -1.0 | -15.8 | -2.6 | 3.6 ||-------------------------------------+-------+-------+------+------|| The world | 3.1 | -1.0 | 3.9 | 4.1 ||-------------------------------------+-------+-------+------+------|| Swedish economy. Year-on-year | 2008 | 2009 | 2010 | 2011 || changes, % | | | | ||-------------------------------------+-------+-------+------+------|| GDP, working day adjusted | -0.5 | -4.2 | 2.5 | 2.8 ||-------------------------------------+-------+-------+------+------|| GDP, actual | -0.2 | -4.3 | 2.8 | 2.8 ||-------------------------------------+-------+-------+------+------|| Unemployment, % (EU definition) | 6.2 | 8.3 | 9.8 | 9.9 ||-------------------------------------+-------+-------+------+------|| Consumer Price Index (CPI) | 3.4 | -0.3 | 1.2 | 2.4 || inflation | | | | ||-------------------------------------+-------+-------+------+------|| Government net lending (% of GDP) | 2.5 | -1.9 | -2.5 | -2.3 ||-------------------------------------+-------+-------+------+------|| Repo rate (December) | 2.00 | 0.25 | 2.00 | 3.00 ||-------------------------------------+-------+-------+------+------|| Exchange rate, EUR/SEK (December) | 10.92 | 10.20 | 9.70 | 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, Ukraine andRussia and a global presence through its international network inleading financial centres. On September 30, 2009, the Group's totalassets amounted to SEK 2,233 billion and its assets under managementtotalled SEK 1,295 billion. The SEB Group has about 20,000 employees.Read more about SEB at www.sebgroup.com._____________________________________________For further information, please contact:Robert Bergqvist, +46 70 445 1404Daniel Bergvall, +46 8 763 8594Mattias Bruér, +46 8 763 8506Håkan Frisén, +46 70 763 8067Olle Holmgren +46 8 763 8079Mikael Johansson, +46 8 763 8093Tomas Lindström, +46 8 763 8028Elisabeth Lennhede, Press & PR, +46 8 763 9916,elisabeth.lennhede(at)seb.sehttp://hugin.info/1208/R/1356850/329881.pdfhttp://hugin.info/1208/R/1356850/329891.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 24.11.2009 - 10:19 Uhr
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