Nordic Outlook May 2010

Growth accelerating, but di! cult post-crisis choices aheadNew focus on government debt and fi nancial regulations

Nordic OutlookEconomic Research – May 2010

Nordic Outlook – May 2010 | 3

Contents

International overview 5

The United Kingdom 28

Boxes

4 | Nordic Outlook – May 2010

Economic Research

This report was published on May 4, 2010.

Cut-o! date for calculations and forecasts was April 29, 2010.

Robert Bergqvist Håkan FrisénChief Economist Head of Economic Research+ 46 8 506 230 16 + 46 8 763 80 67

Daniel Bergvall Mattias BruérEconomist Economist+46 8 763 85 94 + 46 8 763 85 06

Ann Enshagen Lavebrink Mikael JohanssonEditorial Assistant Economist+ 46 8 763 80 77 + 46 8 763 80 93

Tomas LindströmEconomist+ 46 8 763 80 28

Gunilla Nyström Ingela HemmingGlobal Head of Personal Finance Research Global Head of Small Business Research+ 46 8 763 65 81 + 46 8 763 82 97

Susanne Eliasson Johanna WahlstenPersonal Finance Analyst Small Business Analyst+ 46 8 763 65 88 + 46 8 763 80 72

SEB Economic Research, K-A3, SE-106 40 Stockholm

Contributions to this report have been made by Thomas Köbel, Klaus Schrüfer, SEB Frankfurt/M and Olle Holmgren, Trading Strategy. Stein Bruun, SEB Oslo is responsible for the Norwegian analysis

See disclaimer on page 50.

International overview


Recovery despite imbalances and crises

reassessed

and a

OECD

SEB

economies

American

German

the opment (OECD)

The

mitments



2008 2009 2010 2011

OECD World, PPP*



2000 2009 2000 2009 2000 2009

cent

tre recovery

GDP OECD

positive spiral in

dip scenario



82 88

5

ally been resilient

US

The



US

SEB

Sweden US

United Kingdom

Nov Jan Sep Nov Jan

2

5

8

2

5

8



Key interest rates

US Bank of England

2

5

2

5 SEB

December be

tries

US

SEB



Jan Sep Jan Sep Jan Sep Jan

system

Currency movements since the EUR/USD peakPercentage change against USD since December 3, 2009

-15,0%

-13,0%

-11,0%

-9,0%

-7,0%

-5,0%

-3,0%

-1,0%

1,0%

3,0%

5,0%

CADMXN

INRKRW

AUDNZDTRYCNYRUBBRLNOKSEK

JPYGBPCHFPLNEUR

The Japanese yen

The


Theme: Reforming the financial infrastructure

resilience and stability

more

Settlements Financial Stability Board

(

more and

(

proposals

TODAYTODAY FUTUREFUTURE

= Real economy = Credit/banking market


Theme

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0Credit growth

680

180

350

100

400

280

80

70

20100

0

100

200

300

400

500

600

700

800

900

US UK Eurozone OtherEurope

Asia

Expected writedowns, USD bn

Realised writedowns, USD bn

The United States


GDP

per cent next year

Inventory contribution Net effect of stimulus

GDP growth

Source: CBO, Recovery.gov, SEB

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q409 10 11

-2

-1

0

1

2

3

4

5

6

-2

-1

0

1

2

3

4

5

6

2

5

Index

88

5

25

55


The United States

Ratio

82 88

85

25

225


The United States

2011

FHFA

8585

gov

We expect US

8.9 per cent in 2011


The United States

CPI inflation

55 85

Core inflation Headline inflation

2

5

2

5 SEB

88

5

25

5

25

85

55


The United States

88

Federal debt

One common rule of thumb is that government bond yields rise by about 50 basis points if their credit rating is downgraded by one step.

Debt to GDP ratios

United Kingdom Canada

82 88

SEB

*

Japan


Japan

Jan Sep Jan Sep Jan Sep Jan Sep Jan

that the

and

Asia


per cent

2011.

China India

Jan Sep Jan Sep Jan Sep Jan

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

The euro zone


85

forecastSEB

Exports


The euro zone

After Greece, Portugal is the country that runs the great-est risk of being hit by market instability. Large government

political experience of belt-tightening programmes, make this small economy highly vulnerable. After that comes Spain, whose extremely high unemployment and weak real estate market provide fertile ground for market scepti-cism to emerge.

Ireland

SloveniaItaly

Finland

Spain

Slovakia

Finland

trend in Germany

5

10.2


The euro zone

that

,

cent next year

Ireland Italy Spain

2009

Budget balance, debt and current account (CA) are measured as HICP, Core) as the

each country and the euro zone average.

Source: European Commission, IMF, SEB


The euro zone

Core inflation HICP inflation

SEB

Refi rate

Jan Apr Jan Apr Jan Apr


The euro zone

Bond yields

The table shows by how many hundredths of a percentage point (basis points) yields with different maturities (10, 5 and 2 years) and yield curves (10yr-3m, 5yr-3m, 2yr-3m) are

government debt are one percentage point higher.

Source: SEB

The United Kingdom


fall to

Nordic Outlook

United Kingdom Italy

Jan Apr Jan Apr Jan Apr

25

225

25

225

Easten Europe


Index

Poland Slovakia

We are

Poland

The Baltics


A

Exports

Latvia

06 07 08 09

domestic demand

ances

matically


The Baltics

Eastern European Out-‐

look

Slovakia

on

Latvian government priority

5

85

The

are strained

Sweden


9.00

Nordic Outlook

5


Sweden

2009 2009 2010 2011

USSweden


Sweden

98 99 00 01 02 03 04 05 06 07 08 09 10 11

8522

28

2008 2009 2010 2011

and then

11100908070605

4650

4600

4550

4500

4450

4400

4350

4300

9.0

8.5

8.0

7.5

7.0

6.5

6.0

5.5Source: Statistics Sweden, SEB

Employment has turned around

SEB

Number of jobs, thousands (LHS)Unemployment, per cent (RHS)

small


Sweden

and 2.2 per cent in 2011

indicates

1 year

104

103

102

101

100

99

104

103

102

101

100

99

Source: Statistics Sweden, SEB

GDP at turning pointsIndex

2009Q1 = 100

2005Q1 = 100

1997Q1 = 100

1993Q3 = 100

1 year

102.0

101.5

101.0

100.5

100.0

99.5

102.0

101.5

101.0

100.5

100.0

99.5

Source: Statistics Sweden, SEB

Employment at turning pointsIndex

Sep. 2009 = 100

May 2005 = 100

May 1997 = 100

March 1994 = 100


Sweden

2010 2011 Employees

of Nordic Outlook that

Total lending

We are

CPIF

jan maj jan maj jan maj jan maj


Sweden

82 88

5

8

SEB

Sweden

SEB


Sweden

per cent

2008 2009 2010 2011


Sweden

Nordic Outlook

2010 2011

In 2010 and


Sweden

be extra clear.

Denmark


Denmark

overheating are mand

1.8 per cent in 2011

stabilisation tendencies in

World

Economic Outlook

points.

Norway


demand

Strong income supports consumption % change (4Q)

-4

-2

0

2

4

6

8

10

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09-4

-2

0

2

4

6

8

10% change (4Q), 2Q average

Private consumption (LHS)Real disposable income excl. share dividends (LHS)

2010

re

covery in residential investment

The Norwegian


Norway

Unemployment shows signs of peaking % of labour force

0

1

2

3

4

5

6

7

8

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 090

1

2

3

4

5

6

7

8% of labour force

LFS unemployment rate, 3 mth. average Registered unemployed

Wage growth and unemployment % change (YoY)

0.0

1.5

3.0

4.5

6.0

7.5

9.0

10.5

87 89 91 93 95 97 99 01 03 05 07 09 11

% of labour force0

1

2

3

4

5

6

7

Annual wages (LHS)LFS unemployment rate (RHS)

Core inflation heading lower % change (12M)

-4.5

-3.0

-1.5

0.0

1.5

3.0

4.5

6.0

95 97 99 01 03 05 07 09-4.5

-3.0

-1.5

0.0

1.5

3.0

4.5

6.0% change (12M)

CPI excl. taxes and energyCore CPI domestic goods and servicesCore CPI imported consumer goods

in 2009


Norway

Monetary Policy Report

Norges Bank deposit rate and rate path Level, %

012345678910

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12012345678910

Level, %

Norges Bank deposit rate Optimal rate path, MPR 1/10Optimal rate path, MPR 3/09

modus operandi

Monetary Policy Report

Stronger NOK is denting inflation % change (12M)

-6

-4

-2

0

2

4

6

99 00 01 02 03 04 05 06 07 08 09 10

-20

-15

-10

-5

0

5

10

15

20

% change (12M), reversed

Core CPI imported consumer goods (LHS)NOK import-weighted index, 6 mth. earlier (RHS)

Finland


Index

year

cent in 2011

Pay

and next

Increased activity early in 2010

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

8


Nordic key economic data

2009 level,

DKK bn 2008 2009 2010 2011

2009 level,



2009 level,

SEK bn 2008 2009 2010 2011

FINANCIAL FORECASTS

2009 level,

EUR bn 2008 2009 2010 2011



2009 level,

EUR bn 2008 2009 2010 2011

US

2009 level,

USD bn 2008 2009 2010 2011

2008 2009 2010 2011

GDP

Unemployment



2008 2009 2010 2011

GDP,

Bond yields

2008 2009 2010 2011


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