Sakte fart, men ikke for Norge - Nordea Markets

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Sakte fart, men ikke for Norge - Nordea Markets

Sakte fart, men ikke for Norge

■ Skjør oppgang

■ Veksten internasjonalt fortsetter, men i lav fart og på en gjørmet

vei. Euroområdet er igjen på vei ned i resesjon, mens farten i

amerikansk og internasjonal økonomi ellers har avtatt. Det er tegn

til noe bedre tider fremover, men usikkerheten er fortsatt stor.

Tygge havner rammes også

■ Investorer har sett på Danmark, Finland, Norge og Sverige som

trygge havner. Mens solen fortsetter å skinne på norsk økonomi,

trues den svenske av mørke skyer. Danmark og Finland er på

kanten av ny resesjon.

■ Innhold

ØKONOMISK

OVERSIKT

SEPTEMBER 2012

OVERBLIKK 04

SAKTE FART, MEN IKKE FOR NORGE

NORGE 08

RISIKO FOR OVEROPPHETING

USA 18

SAKTE FART FREMOVER

EUROOMRÅDET 20

INGEN OPPGANG FØR TILLITEN ER TILBAKE

RUSSLAND 26

DÉJÀ VU FOR INFLASJON

KINA 31

STABILITET, STABILITET OG….STABILITET

OLJE OG RÅVERER 35

OLJEPRISEN VIL HOLDE SEG HØY

SPESIALTEMA 37

TO ALTERNATIVE SCENARIER FOR INTERNASJONAL ØKONOMI

2 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Oversiktstabeller

Makro nøkkeltall ................... 6

Renter ...................................... 7

Valutakurser .......................... 7

Redaktør

Steinar Juel

Sjeføkonom

steinar.juel@nordea.com

Tel +47 2248 6130

Redaksjonen avsluttet

30 August 2012

Besøk oss på:

www.nordeamarkets.com

Datakilder:

Data er hentet fra Reuters Ecowin

og nasjonale statistikkbyråer og

egne beregninger dersom ikke

annet er angitt.

■ Innhold

Overblikk

Sakte fart, men ikke for Norge ....................................................................... 4

NORGE

Risiko for overoppheting kan bli den største utfordringen .............................. 8

Derfor faller ikke eksporten .......................................................................... 10

Nordic economies

SWEDEN

Households prop up the economy ................................................................ 12

DENMARK

Languishing economic growth ..................................................................... 14

FINLAND

Finnish economy has cooled down across the board .................................... 16

Major economies

USA

Moving slowly forward ................................................................................. 18

EURO AREA

Restore confidence to end the recession ...................................................... 20

UK

UK growth stalling – awaiting outside help ................................................... 22

JAPAN

The challenges remain in the long term ........................................................ 23

Emerging Markets

POLAND

Slowdown under control .............................................................................. 24

RUSSIA

Inflation déjà vu ........................................................................................... 26

ESTONIA

Economy remains in a soft patch ................................................................. 28

LATVIA

Economy keeps delivering positive surprises ............................................... 29

LITHUANIA

Showing resilience ...................................................................................... 30

CHINA

Stability, stability and … stability .................................................................. 31

INDIA

A drought of growth ..................................................................................... 33

BRAZIL

Slow BRIC healing ....................................................................................... 34

Commodities

OIL

Oil prices stay high but spare capacity buffer should build ........................... 35

METALS

Metal prices scratching the bottom for now .................................................. 36

SPECIAL THEME

Alternative scenario 1: Back on track ........................................................... 37

Alternative scenario 2: That sinking feeling .................................................. 38

3 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Sakte fart, men ikke for Norge

Tillit er raskt å rive ned, men tar lang tid å bygge opp.

Omfattende budsjettinnstramninger og økonomiske

reformer vedtas og gjennomføres i Irland, Portugal,

Spania og Italia. Det tar imidlertid tid før virkningene

blir så synlige at finansmarkedsaktørenes tillit til

periferilandene vender tilbake. Tillit er avgjørende for at

en selvgående vekst skal vende tilbake. Den europeiske

sentralbankens (ECBs) annonserte villighet til å kjøpe

statsobligasjoner utstedt av periferilandene kan bidra til

at private investorers tillit kommer raskere. Det skal

likevel mye til for at Eurosonen vil oppleve noe annet enn

svak økonomisk vekst de neste par årene. Heller ikke i

USA tror vi veksten blir annet enn moderat, og vi tror

heller ikke veksten i Kina vil vende tilbake til gamle

høyder. Med en vekst i fastlands-BNP på nær 4 prosent

fremstår Norge som et høyvekstland.

Høyere vekst i Norge

2009 2010 2011 2012E 2013E 2014E

Verden (PPP) -0,7 4,7 3,8 3,1 3,5 3,8

- USA -3,5 2,4 1,8 2,2 2,0 2,2

- Euro området -4,2 1,9 1,5 -0,4 0,6 1,7

- Japan -5,5 4,6 -0,7 2,5 1,6 1,1

- Norden -4,9 3,6 2,7 1,6 2,0 2,5

- Danmark -5,8 1,3 1,1 0,7 1,9 2,1

- Finland -8,4 3,3 2,7 0,8 1,2 2,8

- Norge, fastland -1,6 1,9 2,4 3,7 3,0 2,8

- Sverige -5,0 6,2 3,9 1,2 1,8 2,3

- Fremvoksende økonomier 4,6 8,0 7,6 6,1 6,7 6,7

- Kina 9,2 9,2 10,5 8,0 8,3 8,5

Veksten i oljeinvesteringene på 20 prosent i år er en

viktig vekstdriver i norsk økonomi. Disse investeringene,

sammen med fortsatt god ekspansjon i offentlig

tjenesteyting, gjør at Norge fremstår som spesiell. Det

bidrar til ringvirkninger som høy lønnsvekst, høy vekst i

privat forbruk, høy vekst i boligprisene, god vekst i

investeringene i fastlands-Norge og høy

sysselsettingsvekst. Veksten i norsk økonomi ser ut til å

bli enda sterkere enn det vi anslo i Økonomisk Oversikt

Norden som ble publisert 1. juni. Våre prognoser for

investeringene i fastlands-Norge er noe oppjustert, det

samme er prognosene for tradisjonell eksport, og

oljeeksporten.

Det er krevende for de økonomiskpolitiske myndighetene

i et lite land som Norge når veksten her er sterk mens den

er lav i verden rundt oss. Det utgjør en risiko for den

finansielle stabiliteten når lav rente i andre land bidrar til

nær rekordlav styringsrente i høyvekstlandet Norge.

Kronen er sterk fordi den er attraktiv for

trygghetssøkende investorer og gir noe høyere

avkastning enn andre trygge valutaer. Uroen i

finansmarkedene har avtatt i løpet av august og det er

grunn til å vente at stabiliseringen vil fortsette når Den

europeiske sentralbankens opplegg for obligasjonskjøp

blir kjent. Redusert uro i finansmarkedene og større

risikovillighet hos private investorer tilsier at interessen

for den norske kronen vil reduseres, noe som i neste

■ Overblikk

omgang gir Norges Bank et noe større rom for å kunne

heve styringsrenten. I følge våre anslag vil Norges Bank

være den første sentralbanken i et vestlig land som hever

renten. Første renteøkning tror vi kommer i mars,

deretter en i andre del av 2013. I 2014 venter vi tre

renteøkninger, hver på ¼ prosentpoeng.

Robust norsk eksport og industri

Den kostnadsmessige konkurranseevnen til norsk industri

har forverret seg sterkt i år. Høy lønnsvekst, sterk krone

og svak produktivitetsvekst har bidratt til det. Likevel er

norsk industri en av de få i den vestlige verden som viser

vekst. Det har sammenheng med at norsk industri er blitt

mer og mer rettet inn mot å produsere utstyr til olje- og

gassvirksomhet i både Norge og utlandet.

Sammensetningen av norsk eksport utenom olje og gass

har endret seg vesentlig de siste 20-40 årene. For det

første har eksporten av tjenester utenom sjøfart økt

kraftig. Veksten i slike tjenester har motvirket en kraftig

nedgang i betydning til fraktinntekter fra utenriks sjøfart.

Tjenesteeksporten samlet er derfor fortsatt nesten like

stor som tradisjonell vareeksport. Statistikken for

tjenesteeksporten er lite spesifisert, men det ser ut til at

det er eksport av tjenester knyttet til olje- og

gassvirksomhet i utlandet, og til utstyr levert til slike

formål, som særlig har vokst. Når det gjelder

sammensetningen av vareeksporten er metalleksporten på

vikende front, mens eksporten av fisk (oppdrettslaks) og

av maskiner og utstyr har økt i viktighet. Maskiner og

utstyr er en svært sammensatt eksportgruppe. Men det er

spesialiserte produkter, trolig mye relatert til

offshorevirksomhet og energiproduksjon ellers som har

vokst. I kapittelet om Norge presenteres en nærmere

analyse av tradisjonell norsk eksport.

Norsk industri og eksport har alltid hatt et relativt lite

innslag av masseproduserte forbruks- og

investeringsvarer hvor lønnskostnader er en viktig

konkurranseparameter. Innslaget av slike produkter er de

siste årene blitt enda mindre. Markedene for mange av

produktene og tjenestene som er viktige for norsk eksport

har holdt seg godt oppe, og til dels vokst, tross

finanskrisen. Norge har også lite direkte eksport til

kriselandene i Eurosonen. Dette forklarer hvorfor norsk

eksport og industri i så begrenset grad ble rammet av

konjunktursvikten knyttet til finanskrisen i USA og nå i

Eurosonen.

Noe høyere rente og sterkere krone ville ikke vært

noen ulykke

Når en ser hvordan strukturen på norsk eksport har endret

seg og hvor robust den har vært, er det grunn å reise

spørsmål ved om bekymringen for den kostnadsmessige

konkurranseevnen til norsk næringsliv er overdrevet. En

får litt inntrykk av at man er opptatt av å bevare en

4 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


næringsstruktur vi ikke lenger har, eller kanskje aldri har

hatt. Tilsvarende som Sveits, har Norge eksportnæringer

som synes langt mindre følsomme overfor

kostnadsnivået enn tilfellet ville vært dersom eksporten

vår hadde bestått av skjorter og TV’er. Ja, vi er blitt mer

spesialiserte og sårbare overfor sjokk som eventuelt

måtte ramme olje- og gassmarkedene. Men i en verden

med sterkere spesialisering vil en liten åpen økonomi

som den norske aldri kunne utvikle en bred og allsidig

næringsstruktur som det en stor økonomi som for

eksempel den amerikanske kan. Uansett hvilken

spesialisering som utvikles i Norge vil vi som en liten

åpen økonomi være sårbare dersom noe skulle skje med

markedet for det vi er mest spesialister på.

Oppbyggingen av petroleumsfondet med et bredt

investeringsunivers er en måte å redusere denne

sårbarheten på, og å lette omstillingene når

oljevirksomheten en gang går mot slutten. Med de nye

funnene som nå gjøres på norsk sokkel er tidspunktet for

det skutt ut i tid.

Selv om Norge har god tilgang på arbeidskraft fra

utlandet, er det ikke til å unngå at den sterke

ekspansjonen innen offshorevirksomheten krever at

andre bedrifter frigjør arbeidskraft ved å legge ned

produksjon eller flytte til utlandet. Sterkere krone

og/eller høy lønnsvekst er mekanismene som får det til.

Det ville trolig ikke vært noen stor ulykke om renten i

Norge var satt noe høyere og kronen var blitt noe

sterkere. Lønnsveksten kunne da blitt noe lavere, og

risikoen for finansiell ustabilitet redusert.

Viktige uker for Eurosonen

September blir avgjørende for antagelsen om at

finansuroen i Euroområdet ikke vil eskalere igjen. Den

europeiske sentralbankens (ECBs) opplegg for kjøp av

statsobligasjoner skal vedtas og offentliggjøres. Det er

parlamentsvalg i Nederland som kan resultere i en

regjering som er enda mer negativ til finansiell bistand til

kriselandene. Videre skal den tyske forfatningsdomstolen

avgjøre om krisefondet ESM er i strid med den tyske

grunnloven. Og endelig får vi statusrapporten om Hellas

fra troikaen IMF\EU-Kommisjonen\ECB. Den blir

avgjørende for om Hellas får utbetalt mer penger og gis

noe mer tid til å redusere budsjettunderskuddet og

gjennomføre avtalte reformer. Skulle rapporten bli svært

negativ går det mot en gresk finansiell krise og

sannsynlig uttreden av Eurosonen i løpet av høsten.

Situasjonen i Hellas er vanskelig, men

samlingsregjeringen ledet av statsminister Samaras

signaliserer vilje til å følge opp kravene fra EU og IMF.

Videre er det god grunn til vente at ECBs opplegg for

kjøp av statsobligasjoner kan bidra til å redusere

rentedifferansen mellom periferilandene og Tyskland.

Alle problemer vil ikke med dette være løst, men det gjør

jobben lettere for regjeringer som kjemper for å få ned

budsjettunderskuddene, og for banker som skal låne ut

penger til investeringer i næringslivet. Våre anslag om en

■ Overblikk

svak vekstoppgang i Eurosonen gjennom 2013 og 2014

forutsetter at rentedifferansene fortsetter å komme mer

inn.

Vi har i et eget kapittel angitt to alternative scenarier for

internasjonal økonomi, ett med høyere vekst og ett med

dypere og mer langvarig nedgang. Scenariet med høyere

vekst er blant annet basert på at tilliten til Eurosonen

vender raskere tilbake enn det vi har forutsatt. I

nedgangsscenariet antas ECBs opplegg for kjøp av

obligasjoner å bli for restriktivt til å roe ned markedene

og at motstanden i de nordlige Euroland mot bistand til

periferilandene øker. Videre antas det at veksten i Kina

svekkes ytterligere. I en slik situasjon vil resesjonen i

Eurosonen forsterkes og fortsette gjennom 2013.

Resultatet antas også å bli at oljeprisen faller til USD 75-

80 pr. fat på det laveste. Selv et slikt scenario vil i

begrenset grad dempe veksten innen offshorenæringene i

Norge. I utgangspunktet venter vi at oljeprisen vil stige

svakt fremover, til USD 116 pr. fat i slutten av 2014.

Langsom oppgang i USA

Oppgangen i USA har vært langsom. Kvartaler med

robust vekst har vært avløst av kvartaler med lav vekst.

Etter relativt høy vekst i vinter, har vi nå bak oss et svakt

kvartal. Vi venter at veksten i USA tar seg noe opp igjen

i høst og i 2013, men oppgangen etter finanskrisen vil

fortsette å fremstå som moderat. Det skaper stor

usikkerhet at det vil bli store skatteøkninger og kutt i

utgiftene på det føderale budsjettet dersom

republikanerne og demokratene i Kongressen ikke blir

enige om noe annet. I våre prognoser har vi forutsatt at

disse tilstramningene i budsjettet blir reversert. Hvis ikke

vil USA kunne gå inn i en ny resesjon neste år.

Større usikkerhet om Kina

Den økonomiske veksten i Kina har avtatt, men vi venter

at den tar seg noe opp igjen i løpet av høsten.

Myndighetene har redusert renten og lettet på

kredittrestriksjonene. Ytterligere lettelser i penge- og

kredittpolitikken kan ventes. Det foreligger også

omfattende investeringsplaner på regionnivå. I løpet av

de kommende måneder vil det foretas store endringer i

det politiske lederskapet i Kina, både sentralt og på

region- og lokalnivå. Regional BNP-vekst er vanligvis

blitt vurdert som et suksesskriterium for regionale og

lokale partipamper. Derfor er det all grunn til å vente

kraftige stimulansetiltak på disse nivåene i månedene

som kommer. Mye av dette vil måtte finansieres med lån.

Gjeldssituasjonen til regionene er i utgangspunktet

uoversiktlig, og det er grunn til bekymring for den

finansielle stabiliteten når vi ser noe lenger frem.

Steinar Juel, sjeføkonom

steinar.juel@nordea.com +47 2248 6130

5 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


■ Overblikk

BNP reel vekst, % Inflasjon, %

2010 2011 2012E 2013E 2014E 2010 2011 2012E 2013E 2014E

Verden 1) 4.6 3.8 3.1 3.5 3.8 Verden 1) 2.8 4.1 2.9 2.9 2.9

USA 2.4 1.8 2.2 2.0 2.2 USA 1.6 3.1 2.1 2.2 2.2

Euroområdet 1.9 1.5 -0.4 0.6 1.7 Euroområdet 1.6 2.7 2.2 1.6 1.6

Kina 9.2 10.5 8.0 8.3 8.5 Kina 3.3 5.4 3.1 4.0 3.8

Japan 4.6 -0.7 2.5 1.6 1.1 Japan -0.7 -0.3 0.2 -0.1 -0.1

Danmark 1.3 0.8 0.7 1.9 2.1 Danmark 2.3 2.8 2.4 2.0 2.2

Norge 1.9 2.4 3.7 3.0 2.8 Norge 2.5 1.2 0.8 1.8 2.1

Sverige 6.2 3.9 1.2 1.8 2.3 Sverige 1.2 3.0 1.2 1.2 2.0

UK 1.8 0.8 -0.4 1.0 1.7 UK 3.3 4.5 3.0 2.2 1.4

Sveits 2.7 2.1 1.5 1.9 2.4 Sveits 0.7 0.2 -0.7 0.6 1.6

Tyskland 4.0 3.1 0.9 1.4 2.1 Tyskland 0.2 1.2 1.9 1.7 2.1

Frankrike 1.6 1.7 0.1 0.8 1.7 Frankrike 0.1 1.7 2.1 1.8 1.9

Italia 1.8 0.5 -2.3 -0.5 1.0 Italia 1.6 2.9 3.1 2.1 1.5

Spania -0.3 0.4 -1.2 -0.9 1.1 Spania 2.0 3.1 2.4 2.2 0.5

Nederland 1.6 1.1 -0.2 1.2 1.7 Nederland 0.9 2.5 2.4 1.7 1.8

Østerrike 2.3 2.7 0.9 0.8 1.7 Østerrike 1.7 3.6 2.2 1.8 1.9

Belgien 2.4 1.8 -0.4 0.6 1.8 Belgien 2.3 3.5 2.2 1.5 1.7

Portugal 1.4 -1.6 -2.7 0.0 1.2 Portugal 1.4 3.6 2.9 1.5 1.3

Hellas -3.5 -6.9 -6.6 -0.9 1.2 Hellas 4.7 3.1 0.5 -0.5 0.0

Finland 3.3 2.7 0.8 1.2 2.8 Finland 1.2 3.4 3.0 2.5 2.3

Irland -0.8 1.4 -0.2 1.5 2.1 Irland -1.6 1.2 1.8 1.5 1.5

Estland 2.3 7.6 2.3 3.5 3.8 Estland 3.0 5.0 3.7 3.0 2.9

Polen 3.9 4.3 2.8 2.3 3.1 Polen 2.6 4.3 3.9 2.7 2.2

Russland 4.0 4.4 4.2 4.8 5.0 Russland 6.9 8.5 6.3 6.8 7.0

Latvia -0.3 5.5 4.2 2.5 3.9 Latvia -1.1 4.4 2.3 2.5 2.8

Litauen 1.4 5.9 2.7 3.3 3.5 Litauen 1.3 4.1 3.0 2.8 3.0

India 9.6 6.9 6.0 6.7 7.2 India 9.6 9.5 7.5 6.8 7.0

Brasil 7.6 2.8 2.6 4.6 4.8 Brasil 5.0 6.4 5.2 5.4 5.8

Offentlig budsjettbalanse, % av BNP Driftsbalanse, % av BNP

2010 2011 2012E 2013E 2014E 2010 2011 2012E 2013E 2014E

USA -8.9 -8.6 -7.0 -5.5 -4.1 USA -3.0 -3.1 -3.0 -3.5 -3.0

Euroområdet -6.2 -4.1 -3.7 -3.0 -2.5 Euroområdet 0.0 0.0 0.3 0.7 1.0

Kina -1.7 -1.1 -1.5 -2.3 -1.9 Kina 5.1 2.8 2.5 2.2 1.5

Japan -9.0 -9.7 -9.9 -9.6 -9.0 Japan 3.6 2.0 2.1 2.5 2.4

Danmark -2.7 -1.9 -3.9 -2.1 -0.5 Danmark 5.5 6.7 5.8 5.1 4.4

Norge 11.3 13.8 13.7 13.9 13.6 Norge 12.4 14.5 14.9 15.4 15.1

Sverige -0.1 0.1 -0.3 -1.0 -0.5 Sverige 6.8 7.0 7.2 7.6 7.5

UK -10.4 -8.3 -7.6 -6.4 -4.7 UK -2.5 -1.9 -2.3 -2.1 -1.3

Sveits 0.7 0.8 0.1 0.1 0.2 Sveits 14.3 10.4 9.3 8.7 9.9

Tyskland -4.3 -1.0 -0.8 -0.6 -0.5 Tyskland 5.8 5.3 4.6 4.4 4.0

Frankrike -7.1 -5.2 -4.7 -3.9 -3.5 Frankrike -2.2 -2.7 -2.4 -2.1 -2.0

Italia -4.6 -3.9 -2.0 -1.8 -1.0 Italia -3.5 -3.1 -2.0 -1.0 -0.5

Finland -2.5 -0.6 -0.5 -0.1 0.5 Finland 1.6 -1.1 -0.2 0.2 0.6

Estland 0.2 1.0 -1.5 -0.5 -0.3 Estland 3.8 2.1 -2.3 -1.5 -1.3

Polen -7.8 -5.1 -3.3 -3.3 -2.9 Polen -4.7 -4.3 -3.6 -3.0 -3.0

Russland -4.0 0.5 0.2 0.5 0.7 Russland 4.8 4.5 4.2 3.0 2.5

Latvia -8.2 -3.5 -2.2 -2.0 -2.0 Latvia 3.0 -1.2 -3.2 -3.5 -3.6

Litauen -7.2 -5.5 -2.7 -3.0 -3.0 Litauen 1.1 -1.6 -2.7 -3.0 -3.0

India -3.6 -6.6 -7.0 -7.5 -8.0 India -3.3 -2.8 -4.0 -3.0 -2.2

Brasil -2.7 -2.4 -2.0 -2.1 -2.2 Brasil -2.3 -2.1 -2.5 -2.7 -2.8

1) Veid gjennomsnitt av landene i denne t abellen. Dekker 70,5% av verdens BNP. Vektene er beregnet ut fra kjøpekraftskorrigerte BNP-nivåer for 2008 i henhold t il IM F's World Economic Out look dat ab

6 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


■ Overblikk

Pengepolitiske styringsrenter Differanse styringsrenter mot Euro-området

30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14

USA 0.25 0.25 0.25 0.25 2.00 USA -0.50 -0.25 -0.25 -0.25 1.00

Japan 0.10 0.10 0.10 0.10 0.10 Japan1) -0.15 -0.15 -0.15 -0.15 -1.90

Euroområdet 0.75 0.50 0.50 0.50 1.00 Euroområdet - - - - -

Danmark 0.20 0.05 0.15 0.25 1.00 Danmark -0.55 -0.45 -0.35 -0.25 0.00

Sverige 1.50 1.25 1.00 1.50 2.00 Sverige 0.75 0.75 0.50 1.00 1.00

Norge 1.50 1.50 1.75 2.00 2.75 Norge 0.75 1.00 1.25 1.50 1.75

UK 0.50 0.50 0.50 0.50 1.00 UK -0.25 0.00 0.00 0.00 0.00

Sveits 0.00 0.00 0.00 0.50 1.00 Sveits -0.75 -0.50 -0.50 0.00 0.00

Polen 4.75 4.50 4.00 4.00 4.50 Polen 4.00 4.00 3.50 3.50 3.50

Russland 8.00 8.00 8.25 8.25 8.25 Russland 7.25 7.50 7.75 7.75 7.25

Kina 6.00 5.75 5.75 6.00 6.00 Kina 5.25 5.25 5.25 5.50 5.00

India 8.00 8.00 7.75 7.75 7.50 India 7.25 7.50 7.25 7.25 6.50

Brasil 7.50 7.50 7.50 8.00 10.50 Brasil 6.75 7.00 7.00 7.50 9.50

1) M o t USA

3 mdr. renter Differanse 3 mnd. renter mot Euro-området

30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14

USA 0.42 0.45 0.50 0.60 2.50 USA 0.13 0.20 0.25 0.10 1.30

Euroområdet 0.29 0.25 0.25 0.50 1.20 Euroområdet - - - - -

Danmark 0.31 0.35 0.40 0.70 1.45 Danmark 0.03 0.10 0.15 0.20 0.25

Sverige 1.95 1.55 1.50 2.00 2.50 Sverige 1.66 1.30 1.25 1.50 1.30

Norge 2.05 2.02 2.27 2.43 3.16 Norge 1.76 1.77 2.02 1.93 1.96

UK 0.68 0.60 0.60 0.60 1.25 UK 0.40 0.35 0.35 0.10 0.05

Polen 5.04 4.85 4.35 4.30 4.80 Polen 4.75 4.60 4.10 3.80 3.60

Russland 7.17 7.40 7.50 7.50 8.00 Russland 6.88 7.15 7.25 7.00 6.80

Latvia 0.61 0.55 0.50 0.50 1.20 Latvia 0.32 0.30 0.25 0.00 0.00

Litauen 0.89 0.75 0.80 1.10 1.70 Litauen 0.60 0.50 0.55 0.60 0.50

10-års benchmark statsobligasjonsrenter Differanse 10-års renter mot Euro-området

30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14

USA 1.64 2.00 2.50 3.00 4.00 USA 0.30 0.25 0.60 0.80 1.35

Euroområdet 1.35 1.75 1.90 2.20 2.65 Euroområdet - - - - -

Danmark 1.08 1.55 1.75 2.05 2.55 Danmark -0.26 -0.20 -0.15 -0.15 -0.10

Sverige 1.38 1.80 2.00 2.60 3.00 Sverige 0.04 0.05 0.10 0.40 0.35

Norge 1.97 2.58 2.86 2.96 3.14 Norge 0.62 0.83 0.96 0.76 0.49

UK 1.48 1.75 2.00 2.25 2.75 UK 0.14 0.00 0.10 0.05 0.10

Polen 4.92 4.80 4.90 5.00 5.50 Polen 3.58 3.05 3.00 2.80 2.85

Valutakurser mot NOK Valutakurser mot EUR og USD

30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14

EUR/NOK 7.31 7.50 7.50 7.40 7.50 EUR/USD 1.26 1.30 1.20 1.15 1.10

USD/NOK 5.81 5.77 6.25 6.43 6.82 EUR/JPY 1) 99 104 98 98 99

JPY/NOK1 7.40 7.21 7.62 7.57 7.58 EUR/GBP 0.79 0.81 0.78 0.77 0.75

DKK/NOK 0.98 1.01 1.01 0.99 1.01 EUR/CHF 1.20 1.20 1.20 1.25 1.30

SEK/NOK 0.87 0.90 0.88 0.86 0.87 EUR/SEK 8.36 8.35 8.50 8.60 8.60

GBP/NOK 9.21 9.29 9.68 9.67 10.0 EUR/NOK 7.31 7.50 7.50 7.40 7.50

CHF/NOK 6.08 6.25 6.25 5.92 5.77 EUR/PLN 4.19 4.00 3.92 3.80 3.70

PLN/NOK 1.74 1.88 1.91 1.95 2.03 USD/JPY 78.6 80.0 82.0 85.0 90.0

USD/GBP 1.58 1.61 1.55 1.50 1.47

RUB/NOK 0.18 0.19 0.21 0.23 0.24 USD/CHF 0.96 0.92 1.00 1.09 1.18

LVL/NOK 10.5 10.7 10.7 10.5 10.7 USD/SEK 6.66 6.42 7.08 7.48 7.82

LTL/NOK 2.12 2.17 2.17 2.14 2.17 USD/NOK 5.81 5.77 6.25 6.43 6.82

CNY/NOK 0.92 0.91 0.99 1.03 1.12 USD/PLN 3.33 3.08 3.27 3.30 3.36

1) Pr. 100 enheder USD/CNY 6.35 6.36 6.34 6.25 6.10

USD/INR 55.6 55.0 53.0 48.0 45.0

USD/BRL 2.05 1.95 1.85 1.75 1.70

7 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Risiko for overoppheting kan bli den største utfordringen

Sterk vekst i innenlandsk etterspørsel

Høy innvandring hindrer overoppheting

Og Norges Bank kan gå forsiktig fram

Det er få svakhetstegn i norsk økonomi og vi ser ingen

grunn til å endre vårt optimistiske bilde av utviklingen

fremover. Veksten blir sterk, men takket være høy

arbeidsinnvandring unngår vi sannsynligvis en

overoppheting og kraftig tiltagende kostnadsvekst.

Lønnsveksten blir riktignok langt høyere enn hos våre

naboland, men ikke så høy at den presser prisveksten

over inflasjonsmålet. Sterk økonomisk vekst og noe

høyere kapasitetsutnyttelse tilsier likevel en viss økning i

rentene de neste par årene. Det er imidlertid begrenset

hva Norges Bank kan gjøre med norske renter uten at

kronen styrkes for mye.

Sterk forbruksvekst

Sterk lønns- og sysselsettingsvekst og en svært lav

prisvekst betyr at forbrukernes kjøpekraft for tiden øker

kraftig. Det er derfor ikke underlig at forbruksveksten i

første halvår var svært høy etter en merkelig svak

utvikling i fjor. Med et i utgangspunktet høyt nivå på

sparingen og et fortsatt sterkt arbeidsmarked regner vi

med at forbruksveksten fortsetter med uforminsket styrke

ut året og inn i 2013. I løpet av 2013 og i 2014 ventes

forbruksveksten å avta noe som følge av et noe høyere

rentenivå og mer moderat vekst i sysselsettingen.

Bedre eksport, men svakere fastlandsinvesteringer

Til tross for svak vekst hos våre handelspartnere, sterk

krone og en lønnsvekst godt over andre lands har

Norge

eksporten fra fastlandsøkonomien holdt seg bedre oppe

enn fryktet. Deler av eksportnæringene sliter, men

veksten i samlet eksport har blant annet vært holdt oppe

av en sterk vekst i eksporten av elektrisitet. Det er trolig

er midlertidig, men den sterke veksten i eksporten av

verkstedprodukter er neppe det. Den reflekterer

oljeleverandørindustriens økende betydning for norsk

eksport. Med vedvarende høye oljepriser er utsiktene for

denne eksporten god også for de neste årene. I løpet av

prognoseperioden ventes også veksten i den mer

tradisjonelle eksportindustrien å ta seg opp som følge av

sterkere vekst i våre tradisjonelle eksportmarkeder.

For leverandørindustrien til oljesektoren er den ekstremt

kraftige veksten i norske oljeinvesteringer av avgjørende

betyding. Veksttakten vil avta noe i årene som kommer,

men vi regner likevel med at kapasitetsbegrensninger på

mange områder blir viktigste hinder for ekspansjonen i

disse næringene. Trykket i denne delen av industrien

synes å være en viktig grunn til at lønnsoppgjørene gir en

lønnsvekst i industrien langt over det vi ser i

konkurrentlandene.

Også fastlandsinvesteringene regner vi med vil vokse bra

framover, selv om veksttakten neppe blir så høy som for

oljeinvesteringene. Investeringsviljen bør være god med

sterk produksjonsvekst i store deler av næringslivet. Noe

høyere kredittmarginer og strengere kredittpraksis i

bankene kan begrense investeringsveksten noe, men det

det oppveies trolig i stor grad av at det generelle

rentenivået er svært lavt. En eventuell kraftig eskalering

av eurokrisen kan imidlertid gi en kraftige

kredittinnstramning og er kanskje en av de største

risikoene for norsk økonomi.

Norge: Makroøkonomiske indikatorer (% årlig vekst hvis ikke annet oppgitt)

2009( bn) 2010 2011 2012E 2013E 2014E

Konsum i husholdninger og ideelle org. 1,028 3.7 2.4 3.7 3.5 3.0

Konsum i offentlig forvaltning 531 1.7 1.5 2.0 2.5 2.5

Bruttoinvesteringer i fast kap. i alt 516 -5.2 6.4 7.2 4.9 3.7

- Bruttoinvesteringer, Fastlands-Norge 349 -2.5 8.0 3.2 3.7 3.7

- Bruttoinvesteringer, olje 144 -14.3 9.1 20.0 8.0 4.0

Lagerinvesteringer* 14 1.9 0.3 0.0 0.0 0.0

Eksport 929 1.8 -1.4 1.6 1.1 1.3

- olje og gass 416 -4.8 -6.2 2.5 0.0 0.0

- andre varer 277 2.5 -0.4 0.0 2.0 2.5

Import 660 9.9 3.5 3.0 3.9 3.0

BNP 2,357 0.7 1.4 3.4 2.4 2.3

BNP, Fastlands-Norge 1,876 1.9 2.4 3.7 3.0 2.8

Arbeidsledighet (AKU), % 3.6 3.3 3.0 2.9 2.9

Konsumpriser, % årsvekst 2.5 1.2 0.8 1.8 2.1

Underliggende inflasjon, % årsvekst 1.4 0.9 1.2 1.5 2.1

Årslønn inkl. pensjonskostnader, % årsvekst 3.6 4.3 4.2 4.3 4.3

Driftsbalanse (mrd. NOK) 313.6 393.9 437.1 482.9 497.5

- i % av BNP 12.4 14.5 14.9 15.4 15.1

Handelsbalanse i % av BNP 12.4 13.8 14.6 15.1 14.8

Overskudd offentlige budsjetter 284.5 375.1 400.0 435.0 450.0

- i % av BNP 11.3 13.8 13.7 13.9 13.6

* Contribution to GDP growth (% points)

8 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Inflasjonen kryper sakte oppover

Sterk vekst i innenlandsk etterspørsel vil bidra til sterk

produksjonsvekst i årene som kommer. Takket være høy

innvandring regner vi ikke med at det blir noe problem å

dekke etterspørselen etter arbeidskraft. Vi regner heller

ikke med store flaskehalsproblemer på arbeidsmarkedet

selv om det er knapphetsproblemer innen enkelte

fagområder. Det betyr at lønnsveksten ikke vil tilta

vesentlig, men holde seg relativt høy, det vil si i overkant

av 4 % i årene som kommer. Sammen med god vekst i

innenlandsk etterspørselsvekst og en relativt stabil krone

tilsier det at inflasjonen vil tilta i årene som kommer.

Underliggende inflasjon kan komme opp i 2 % i løpet av

prognoseperioden, fra dagens 1 %, men kostnadsveksten

må trolig bli sterkere for at inflasjonen skal komme over

målet på 2 ½ %.

Langsom renteoppgang

God vekst, et relativt stramt arbeidsmarked, noe høyere

inflasjon og noe lysere utsikter internasjonalt tilsier at

Norges Bank ønsker å sette opp renten i

prognoseperioden. Fortsatt stigende boligpriser og

gjeldsvekst fra et høyt nivå tilsier også at rentene ønskes

noe opp. Men en inflasjon som fortsatt er under målet og

en vekst i økonomien om lag på linje med veksten i

kapasiteten tilsier at Norges Bank ikke vil ha hastverk.

Uten renteøkninger i nabolandene vil en aggressiv

økning hos oss gi svært sterk krone og gjøre at

inflasjonen igjen falle lenger under målet.

Når dette skrives har NOK styrket seg relativt mye mot

EUR, men målt med NOKs importveide verdi er

styrkingen langt begrenset. Vi regner med at Norges

Bank setter opp renten to ganger neste år uten at det vil

føre til en varig videre kronestyrking. I 2014 kan takten i

renteøkningene økes noe, men siden vi venter

renteøkninger også i andre land, kan Norges Banks

økninger skje uten at trykket mot en sterkere krone bli for

stort.

Det er en klar risiko for at en høy innenlandsk

etterspørselsvekst gir større kapasitetsproblemer, høyere

lønnsvekst og dermed etterhvert høyere inflasjon enn vi

venter. Da vil Norges Bank gå fortere fram med

renteøkningene og akseptere at det slår ut i en sterkere

krone. Kronestyrkingen vil bidra til å hindre at

inflasjonen skyter over målet. Dersom Norges Bank

velger å legge mindre vekt på å nå inflasjonsmålet og

mer på å hindre for sterk boligprisstigning og videre

gjeldsvekst hos husholdningene, kan vi også få en

kombinasjon av høyere renter og sterkere krone. Det er

imidlertid ingen ting i retorikken fra sentralbanken som

tyder på en slik endring i bankens prioriteringer er på

trappene.

Erik Bruce

erik.bruce@nordea.com +47 2248 4449

Norsk industriproduksjon øker forsiktige

Norge

Tiltagende inntektsvekst tilsier høyer forbruksvekst

Tilbudet holder nesten følge med etterspørselen

Ikke så sterk krone importveid

9 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Derfor faller ikke eksporten

Norsk eksport har holdt seg overraskende godt oppe

Eksporten av tjenester har økt markert etter 2009

Fiskeeksporten har økt i viktighet

Men verkstedprodukter og metaller dominerer

Eksporten går til land som klarer seg greit

Eksporten av maskiner til Asia har tatt seg opp

Langt bedre enn fryktet

Norsk eksport har holdt seg overraskende godt oppe til

tross for krise i Europa og svake tendenser globalt

gjennom fjoråret og dette året, se figur. Sammenlignet

med toppnivået før finanskrisen er eksporten av

tjenester faktisk opp 15 % mens eksporten av

tradisjonelle varer fortsatt ligger 5 % under etter å ha

beveget seg mer eller mindre sideveis siden 2009.

Eksport av tjenester veier tungt

Når det snakkes om norsk eksport er det nesten

utelukkende fokus på produksjon og eksport av varer.

Men eksporten av tjenester er nesten like stor som

eksporten av tradisjonelle varer og får ufortjent lite

oppmerksomhet. Eksporten av tjenester har økt kraftig

etter finanskrisen og gitt viktige bidrag til BNP-veksten

i Fastlands-Norge.

Utenriks sjøfart utgjør en sentral del tjenesteeksporten,

men har ikke bidratt til noe vekst etter 2007. Veksten

har vært innen eksport av «forretnings-, profesjons- og

tekniske tjenester», «petroleumstjenester» og «leiearbeid

og reparasjoner». Det er tydelig at Norge har

ekspertise innenfor disse typer tjenester som trosser

både sterk krone og høye lønnskostnader.

Fisk er blitt viktigere

Innen eksport av tradisjonelle varer har det skjedd

betydelige endringer i sammensetningen de siste 40

årene. Ser man på hovedkategoriene har eksporten av

produkter fra jordbruk, skogbruk og fiske tatt seg

kraftig opp og økt som andel av tradisjonell eksport

(målt i verdi) fra i overkant av 2 % i 1970 til 8-9 % de

siste par årene, se figur. Utviklingen innen

lakseoppdrett er årsaken til denne kraftige veksten.

Industriprodukter utgjorde 89 % av eksporten av

tradisjonelle varer i 2011, ned fra 93,8 % i 1970. Det er

særlig i perioden fra finanskrisen i 2007/2008 at

eksport av fisk har økt sin relative betydning som

eksportnæring. En stadig økende fiskeeksport, også

gjennom finanskrisen, bidrar til å holde eksporten

oppe.

Eksporten holder seg oppe

Mer fisk

Verkstedprodukter viktigere

Eksport av maskiner - viktigste kategorier og undergrupper

(Andel av eksport av maskiner i 2011 gitt i parentes)

1. Andre industrimaskiner (23,4 %)

- Pumper for væske

- Mekanisk utstyr for håndtering av gods

2. Maskiner for spesielle industrier (21,3 %)

- Anleggsmaskiner og -utstyr

- Andre maskiner for spesielle industrier ikke ellers nevnt

3. Elektriske maskiner og apparater (20,4 %)

- Utstyr for overføring av elektrisitet

Norge

10 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Men verkstedprodukter og metaller råder

Innenfor eksporten av industriprodukter har det også

vært nokså store endringer i sammensetningen.

Metaller er fortsatt en av Norges viktigste eksportvarer,

men andelen har sunket de siste 40 årene. I 1970

utgjorde metaller hele 34,3 % av eksporten av

tradisjonelle varer, mens i 2011 var andelen 22,4 %.

Aluminiumslegeringer og nikkel er viktigst og står for

nesten halvparten av metalleksporten.

Verkstedprodukter er på den annen side blitt stadig

viktigere og utgjorde i 2011 en like stor andel av

eksporten som metaller, opp fra 12 % i 1970.

Verkstedprodukter omfatter alle typer industrimaskiner

og -utstyr. I tabellen på forrige side har vi listet opp de

tre viktigste kategoriene innenfor eksport av maskiner.

Gjennom finanskrisen og den svake perioden de siste

par årene har det vist seg at sammensetningen av

vareeksporten er mindre konjunkturfølsom enn i f.eks.

Sverige.

Eksporten går til landene som klarer seg greit

Selv om andelen har sunket er det fortsatt Europa som

er vårt viktigste eksportmarked med en andel på 76 % i

2011. I utgangspunktet skulle man ventet at gjeldskrise

og resesjon i Europa ville virket sterkt negativt på

eksporten fra Norge. Som nevnt innledningsvis har

eksporten holdt seg bemerkelsesverdig godt oppe. Én

grunn til det er at lite av norsk eksport går til de hardest

rammede økonomiene i Europa. Med unntak av

Storbritannia har alle våre 10 viktigste

eksportmarkeder (se figur) så langt unngått en ny

resesjon etter finanskrisen. Det har vært svak vekst,

men ingen dyp nedtur, se figur.

Mer maskiner til Asia og Sør-Amerika

Til Asia er det maskiner som er viktigste eksportvare

med en andel i 2011 på 31,2 %, ned fra hele 50 % i

2009. Eksporten av maskiner til Asia falt markert i

2010 og 2011, men har tatt seg opp igjen så langt i

2012 og har nok bidratt til veksten i norsk eksport i

første halvår, se figur. Et markert oppsving i eksporten

av maskiner til Sør-Amerika i samme periode har også

gitt positive bidrag selv om eksporten til den regionen

er langt mindre.

Med andre ord flere grunner til at det går bra

Det er flere grunner til at norsk eksport ikke har falt

som følge av krisen i Europa:

Eksporten av tjenester har hatt en svært

positiv utvikling de siste årene.

Sammensetningen av vareeksporten mindre

konjunkturfølsom. Fisk trekker mye opp.

Våre viktigste eksportmarkeder har unngått en

ny nedtur etter finanskrisen.

Eksporten av maskiner har økt i det siste,

særlig til Asia og Sør-Amerika, regioner som

opplever relativt sterk vekst.

Eksporten går ikke til kriserammede land

Ingen resesjon hos våre viktigste

Kraftig ned, men på vei opp igjen

Eksport av fisk trekker opp

Katrine Godding Boye

Norge

katrine.boye@nordea.com +47 22 48 79 77

Michael Hurum Cook

michael.hurum.cook@nordea.com

11 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Households prop up the economy

GDP growth edging higher in coming years …

… but near term, the labour market will weaken

Long period of low inflation

Riksbank to cut rates this year, and the SEK weakens

Good growth

The Swedish economy has been surprisingly resilient to

the global turbulence. GDP growth did drop towards the

end of 2011, but both the GDP and employment rose

again during H1 2012. The domestic economy was the

key driver of growth, but also foreign trade improved.

Growth in H1 2012 was fairly high, we think, despite the

possibility of a downward revision to Q2 GDP growth.

Although the economy has been able to tackle the global

obstacles better than expected, GDP growth is still not

sufficiently high to prevent a decline in the demand for

labour. We expect unemployment to rise above 8% during

the winter.

Prospects for H2 2012 are mixed. We will likely see subdued

growth. However, longer out there are factors suggesting

a pick-up in activity. A benign situation for

households, a slightly more expansionary economic policy

and a global economy that gradually recovers are the

factors that will underpin higher GDP growth in coming

years. However, due to global weakness growth will only

accelerate slowly and unemployment will not decline until

the latter part of the forecast period

■ Sweden

Households keep the wheels turning

Household finances are generally stable. A low inflation

level and pay rises jack up households’ purchasing power.

Real disposable incomes will rise by about 2% annually

in 2012-2014. The improved household finances

have fed through to the housing market. House prices

have started to rise again after having shown a slightly

weak trend over the past year. Share prices are also important

for households’ propensity to spend, and since

the turn of the year stock markets have recovered somewhat.

The conditions for households are therefore benign

so we expect consumer spending to rise noticeably in

coming years.

Investment activity lost pace in Q2 2012 after rising

sharply at the beginning of the year. There are indications

that capacity utilisation in several sectors has declined,

which reduces the need for new investment. In addition,

investment appetite seems suppressed by the dark clouds

still hanging over Europe. The number of housing starts

has already dropped sharply, and total investment will

show a weak trend in coming quarters. We expect the

general need for investments to be modest during most of

next year and then increase in 2014 in tandem with the

overall pick-up in activity. An expansionary fiscal policy

partly based on infrastructure investment will contribute

to underpinning investment growth over the forecast

horizon.

Tough times for the export industry

Despite some improvement recently, exports of goods

have stagnated over the past year. The order intake re-

Sweden: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (SEKbn) 2010 2011 2012E 2013E 2014E

Private consumption 1,533 3.7 2.0 1.7 2.0 2.1

Government consumption 860 1.9 1.8 0.8 0.5 1.5

Fixed investment 559 7.7 6.2 2.5 1.0 3.5

- industry 74 1.0 7.9 -2.2 2.2 4.4

- residential investment 92 17.2 15.1 -8.7 -2.2 4.5

Stockbuilding* -46 2.1 0.6 -1.1 0.1 0.0

Exports 1,489 11.7 6.9 1.2 4.2 4.9

Imports 1,288 12.7 6.3 -0.4 3.8 5.1

GDP 6.2 3.9 1.2 1.8 2.3

GDP, calendar adjusted 5.9 3.9 1.5 1.8 2.4

Nominal GDP (SEKbn) 3,106 3,331 3,492 3,580 3,703 3,836

Unemployment rate, % 8.4 7.5 7.7 8.0 7.7

Employment grow th 1.0 2.1 0.3 -0.2 0.8

Consumer prices, % y/y 1.2 3.0 1.2 1.2 2.0

Underlying inflation (CPIF), % y/y 2.0 1.4 1.1 1.5 1.5

Hourly earnings, % y/y 0.4 2.9 3.3 3.2 2.8

Current account (SEKbn) 225 243 259 280 288

- % of GDP 6.8 7.0 7.2 7.6 7.5

Trade balance, % of GDP 2.6 2.7 2.9 3.0 2.7

General govt budget balance (SEKbn) -2 5 -12 -38 -18

- % of GDP -0.1 0.1 -0.3 -1.0 -0.5

Gross public debt, % of GDP 39.4 38.4 38.1 39.1 39.6

* Contribution to GDP growth (% points)

12 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


mains weak, and growth in many key export markets is

low. Accordingly, goods exports will likely remain subdued

during the remainder of 2012. Also the strong SEK

is a problem for exporters. However, it probably affects

profitability rather than volumes. The situation will improve

longer out as the SEK will likely weaken and demand

gradually rise.

Sweden’s trade in services, which has increased sharply

so far this year, is gaining significance. Exports of services

have risen from 6% of GDP in 1980 to currently

15% of GDP. The export markets for services are largely

identical to those for goods – where demand is weak.

This suggests that the pick-up in H1 was temporary and

will lose momentum going forward.

Low inflation puts pressure on the Riksbank

Despite an increase in the number of employed this year

the labour market still shows signs of weakness. The demand

for labour has not been sufficiently strong to keep

unemployment in check. Labour market indicators are

still at benign levels, but have started to soften. We look

for a decline in employment and accelerating growth in

unemployment during autumn and winter.

Labour market weakness is usually accompanied by reduced

domestic inflation. Also, the SEK strengthening

helps putting a lid on costs. Inflation pressures thus look

set to moderate even further in future, extending the period

of core inflation markedly below the 2% target. This

may cause some concern for the Riksbank as it could

contribute to further accelerating the decline in inflation

expectations.

The door is thus open for monetary easing. With low inflation,

a weaker labour market, low policy rates internationally

and a risk of further SEK appreciation, the Riksbank

should cut rates this year. But when the economy

starts to recover in the latter part of 2013, the bank will

embark on a hiking cycle.

A paradigm shift for the SEK

The SEK has become a safe-haven currency in 2012. The

reasons are the modest exposure of the Swedish economy

to troubled areas, solid public finances and a highly

competitive business sector that generates surprisingly

strong growth and increased interest rate differentials.

Going forward, we expect the SEK to weaken versus the

EUR in step with a gradual stabilisation of the situation

internationally and a narrowing of interest rate

differentials. However, EUR/SEK will remain at levels

below 9 throughout the forecast period. The USD will

continue to strengthen against most currencies, including

the SEK.

Torbjörn Isaksson

torbjorn.isaksson@nordea.com +46 8 614 8859

Rising incomes and consumption

■ Sweden

Weak global demand a drag on Swedish exports

Reduced pressure on domestic market

Paradigm shift for SEK

13 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Languishing economic growth

Rising activity towards 2014

Housing market improvement

Delayed effect from public money flow

Negative central bank rates work

Low growth and significant uncertainty characterise the

Danish economy; activity has been stuck at largely the

same level since the autumn of 2010. Over coming

quarters, we expect the Danish economy to gradually

return to the growth track this year, expanding at a rate of

0.7% this year, accelerating to 1.9% in 2013 and 2.1% in

2014.

On the domestic front the expected reversal of economic

trends will be driven by households’ large pent-up

potential, which will gradually turn into growing

consumer spending. At the same time, growth is

underpinned by a delayed effect from the public sector,

with expected positive contributions from consumer

spending and investment.

Consumers hang on to their money

Although the payout of saved-up early retirement money

is close to DKK 20bn (already surpassing official

forecasts), the effect on retail sales and consumer

spending has so far not materialised. Instead many have

chosen up save up more; total household bank deposits

have swelled to an all-time high. The Danish economy

therefore lacks the boost to activity that normally results

from consumer spending. Moreover, the government’s

scope for stimulating economic activity through its tax

policy is limited.

■ Denmark

Despite the prospect of a historically high savings ratio

our forecast assumes that consumer spending will

gradually increase towards the end of 2014. The

accelerating consumer spending growth will partly be

driven by a pent-up consumption need and partly by

generally improved sentiment about the Danish

economy. Not least the prospect of increasing

employment and a pick-up in the housing market will

boost Danish households’ propensity to consume over

the forecast period.

Housing market shows signs of healing

Since mid-2008 the ailing housing market has been a

millstone around the neck of the Danish economy. The

contracting housing wealth, slower credit growth and

historically low activity in the construction sector are

some of the main reasons why consumer spending has

stagnated. However, the latest monthly property price

data from Statistics Denmark suggest that housing prices

have stabilised since the start of the year. We believe this

development marks the beginning of a new regime in the

Danish housing market where the historically low

funding costs and substantial pent-up demand over time

will lead to market consolidation.

But prices will be kept in check by a still large supply of

unsold homes, low turnover and high youth

unemployment, which limits the number of first-time

buyers. Trapped between these two opposing trends,

housing prices are likely to remain more or less

unchanged during the rest of the year. Into 2013 we

expect housing prices to slowly edge higher, surpassing

expected inflation again in 2014. The moderately rising

housing prices will first and foremost be concentrated in

the large cities where demographics suggest growing

Denmark: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (DKKbn) 2010 2011 2012E 2013E 2014E

Private consumption 815 1.9 -0.8 0.6 1.8 1.9

Government consumption 497 0.3 -1.3 0.4 0.8 0.8

Fixed investment 314 -3.7 0.2 2.8 4.0 4.7

- government investment 33 8.5 5.2 8.5 -12.0 2.5

- residential investment 80 -7.4 8.8 -5.8 4.7 5.0

- business fixed investment 201 -4.4 -3.8 5.0 7.1 4.9

Stockbuilding* -20 0.1 0.0 0.0

Exports 794 3.2 7.0 2.0 2.9 3.5

Imports 731 3.5 5.2 2.6 3.6 3.6

GDP 1.3 0.8 0.7 1.9 2.1

Nominal GDP (DKKbn) 1,668 1,772 1,783 1,818 1,879 1,949

Unemployment rate, % 6.3 6.2 6.3 6.4 6.2

Gross unemployment level, '000 persons 164.5 162.1 165.0 168.7 163.2

Consumer prices, % y/y 2.3 2.8 2.4 2.0 2.2

Hourly earnings, % y/y 2.3 1.8 1.8 1.9 2.1

Nominal house prices, one-family, % y/y 2.8 -2.8 -4.3 1.2 1.9

Current account (DKKbn) 96.9 119.1 105.0 95.0 85.0

- % of GDP 5.5 6.7 5.8 5.1 4.4

General govt. budget balance (DKKbn) -47.4 -34.5 -71.0 -40.0 -10.0

- % of GDP -2.7 -1.9 -3.9 -2.1 -0.5

Gross public debt, % of GDP 42.9 46.6 45.5 44.5 43.0

* Contribution to GDP growth (% points)

14 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


upward pressure on demand.

Negative central bank rates a success

During the debt crisis the Danish central bank has been

forced to pursue a very proactive monetary policy to

keep the DKK stable versus the EUR. As a vital part of

this defence, the central bank cut its CD rate to -0.20% in

early July. It is the first time in Denmark’s history that

the CO rate is in negative territory. So far this move has

had the desired effect. The DKK has stabilised at a solid

level against the EUR without the central bank needing

to intervene in the market. This contrasts sharply with the

situation in May and June when more than DKK 36bn

was sold to defend the Danish fixed exchange rate

regime.

Public money flow drying out

In a bid to break the current economic deadlock the

government has decided to bring forward public

investment projects to the tune of DKK 19bn. At the

same time public spending is budgeted to grow by DKK

18bn this year and an additional DKK 8bn in 2013 –

corresponding to real growth of 1.5% and 0.1%,

respectively. Despite these intentions public spending

decreased by 1.0% in H1, while public investment only

increased very modestly. So the Danish economy has so

far not received the originally planned boost from fiscal

policy. The explanation to this sluggishness should be

found in the long implementation period for public

investment and in the fact that public-sector spending

historically has been very difficult to fine-tune. Against

this background, there is a likelihood of a strong ketchup

effect in coming quarters, which will help pull the Danish

economy out of the doldrums provided that the

government fulfils its own plans.

Improved competitiveness drive exports forward

After a brief dip at the beginning of the year, exports are

growing again – partly driven by sustained growth in key

export markets, partly by improved competitiveness.

This is chiefly a result of a weakening of the tradeweighted

DKK, which has made Danish products

comparatively cheaper in international markets.

But also the past year’s sharp drop in the pace of wage

growth combined with productivity gains means that unit

labour costs now increase more slowly than in

Denmark’s key export markets. And although the effect

of the lower unit labour costs will not feed though until

slightly longer out, it is a vital precondition for

maintaining the necessary momentum in exports.

Helge J. Pedersen

helge.pedersen@nordea.com +45 33333126

Jan Størup Nielsen

jan.storup.nielsen@nordea.com +45 33333171

Stagnant consumption

The central bank’s CD rate is negative

Improved competitiveness

■ Denmark

Decoupling between employment and house prices

15 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Finnish economy has cooled down across the board

Exports will not recover until 2013

Growth in private consumption will slow down

Employment will fall less than previously forecast

Public sector deficit will decrease

As expected, economic activity has decreased in Finland

across the board after the first quarter of this year.

Exports have contracted, investment has continued to

decline and the growth in private consumption has

slowed down. Imports have decreased more than exports,

which is, in particular, a sign of weakening in domestic

demand. What is positive, is that employment has not yet

weakened. However, it is probably only a question of

time before it does.

Based on preliminary data, the economy contracted in Q2

compared to the previous quarter. Our forecast assumes

that the decline continues in Q3. This means that we

believe the Finnish economy is in recession, just like

many other European countries. As in our previous

forecast, however, we believe the recession will not last

long and there is no need to change the previous GDP

growth forecast of 0.8% for this year. On the other hand,

international trade has cooled down more than expected,

which indicates that an export-led recovery from the

recession will be much slower than previously estimated.

That is why we have lowered our forecast for economic

growth in Finland in 2013 to 1.2% (previously 1.6%). In

2014, we expect growth to speed up to 2.8% as especially

the North-European economies will recover.

Exports will not recover until 2013

Finnish goods exports have varied widely over the past

year – and the variation has taken place around a

decreasing trend. New orders received by the industrial

■ Finland

sector, for instance, turned down again in the first half of

the year. In our forecast, we assume export volumes to

continue declining in the latter part of the year. The

decreasing world trade growth will weaken production

expectations globally and decrease investment needs.

This is bad news to the Finnish export industry, as its

main products are raw materials, production supplies and

investment goods. We expect international demand to

strengthen moderately in 2013. Export volumes will

increase but growth will still remain modest.

Growth in private consumption to slow down

Private consumption increased at a brisk pace in Q1 this

year compared to Q4 2011. This was a result of the oneoff

additional salary items based on collective

agreements, which boosted retail sales, and the car tax

hike that entered into force at the beginning of April,

which made people purchase new cars earlier than they

otherwise would have. The growth in retail sales volumes

slowed down markedly in Q2 and in July it stopped

altogether. Car sales, too, have decreased sharply.

Thanks to the strong beginning of the year, private

consumption will significantly boost the economic

growth this year despite the recent cooling.

For the remaining part of the year and for 2013, the

outlook for private consumption will remain weak. The

increase in salaries and pensions as well as the decrease

in mortgage interest rates will support households'

purchasing power. The growth in purchase power will,

however, be restrained by tax increases and the expected

weakening in employment. Taxes will increase as the

value added tax will be raised and no inflation

adjustments of income limits will be made in the income

tax brackets. In addition, the rather rapid growth in

consumer prices will continue and erode purchasing

power. Consumer prices are expected to rise by 2.5%

Finland: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (EURbn) 2010 2011 2012E 2013E 2014E

Private consumption 94 3.3 2.5 2.2 1.3 2.0

Government consumption 43 -0.3 0.4 0.3 0.5 0.5

Fixed investment 34 1.9 6.8 -3.2 0.6 3.8

Stockbuilding* -2 0.5 1.1 -0.3 0.3 0.1

Exports 64 7.5 2.6 -1.7 2.6 7.1

Imports 62 6.9 5.7 -3.0 2.9 6.2

GDP 3.3 2.7 0.8 1.2 2.8

Nominal GDP (EURbn) 172.3 178.8 189.4 196.0 201.6 210.1

Unemployment rate, % 8.4 7.8 7.7 8.0 7.9

Industrial production, % y/y 8.3 0.9 -3.0 2.0 4.0

Consumer prices, % y/y 1.2 3.4 3.0 2.5 2.3

Hourly w ages, % y/y 2.6 2.7 3.5 3.0 3.0

Current account (EURbn) 2.9 -2.2 -0.5 0.4 1.2

- % of GDP 1.6 -1.1 -0.2 0.2 0.6

Trade balance (EURbn) 2.6 -1.2 -0.1 0.1 0.8

- % of GDP 1.4 -0.6 -0.1 0.0 0.4

General govt budget balance (EURbn) -4.5 -1.2 -1.0 -0.1 1.0

- % of GDP -2.5 -0.6 -0.5 -0.1 0.5

Gross public debt (EURbn) 90.0 93.0 99.0 104.1 108.4

- % of GDP

* Contribution to GDP growth (% points)

50.3 49.1 50.5 51.6 51.6

16 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


next year. The household savings rate continues to

decline which means that an increasing part of income is

used for consumption. The accommodating monetary

policy is well timed as the consumption outlook would

be much gloomier without it.

Investment to decline, employment to weaken

The bleak short-term outlook for exports, production and

consumption as well as the major uncertainty over the

Euro area developments will eat away economic agents'

confidence and thus decrease willingness to invest and

weaken employment prerequisites. Machinery and

equipment investment increased sharply last year but

turned down again already in the beginning of this year.

The decline is expected to continue at least for the rest of

this year. Construction investment is also expected to

decline. The decrease in the number of granted

construction permits indicates that the decline in

residential and other construction will continue and even

steepen during the latter part of the year. Reconstruction

will compensate for the decline in new construction.

We expect both the traditional machinery and equipment

investment and construction investment to increase again

in 2013. A precondition for this, however, is that the

global economy will grow as forecast, the Euro area debt

crisis will clear up and confidence will return.

The labour market has provided very positive surprises

this year. Employment measured with the number of

people has not weakened (although the number of

working hours has probably started to decrease) and the

number of unemployed people has not started to increase.

Seasonally adjusted unemployment rate has stabilised at

7.5% in recent months. The unemployment rate for 2012

seems to remain at 7.7% (the previous forecast was

8.0%), which is lower than in 2011. We still expect

unemployment to increase, especially in 2013 with the

unemployment rate rising to an average of 8%.

Slower decrease in public sector deficit

Tax revenues will increase at a slower pace due to the

sluggish economic growth, even though income taxation

will be tightened and value added tax will be raised. The

public sector deficit will, however, continue to decline.

The deficit is estimated to decrease to 0.1% of GDP in

2013 and turn into a small surplus in 2014. The

government's annual borrowing need will remain at EUR

4–6bn during the forecast period, which will increase the

public debt close to 52% of the value of total production

already in 2013.

Pasi Sorjonen

pasi.sorjonen@nordea.com +358 9 165 59942

■ Finland

Cooling of world trade brings problems to exports

Weak sentiment points to an outright fall in GDP

A decline in GDP is bad news for employment

Confidence + labour market = weak consumption

17 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Moving slowly forward

If a perfect storm of fiscal chaos is avoided …

... progress towards full employment in 2014

Stronger underlying inflation pressures set to emerge

Fed to start tightening by mid-2014

US economic growth is likely to remain moderate in the

next few years through 2014, constrained by household

deleveraging, fiscal restraint, subpar global demand,

slower working-age population growth and a deterioration

of job skills.

The US economy clearly lost momentum during Q2

2012, but recent economic data paint a slightly brighter

picture, pointing towards GDP growth of 1½-2% in H2

2012. Stronger disposable income growth, easier financial

conditions and bank lending standards, continued

housing recovery, the end of the payback for the warm

winter weather and less drag from seasonal adjustment

distortions suggest that economic momentum will pick

up slightly in the near term.

However, while the threat from the Euro-area crisis currently

appears less menacing, US fiscal challenges

around the end of this year imply that risks to the US

outlook over the next two to three quarters remain tilted

to the downside. The probability of another US recession

is uncomfortably high at 20-25%, in our view.

On the other hand, an orderly resolution of the pending

fiscal issues, as assumed in our baseline scenario, should

pave the way for stronger confidence and hence brighter

economic prospects in 2013, when growth is projected to

exceed potential assumed at around 2% annually through

most of the year.

■ USA

USA: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (USDbn) 2010 2011 2012E 2013E 2014E

Private consumption 9,845.9 1.8 2.5 1.9 2.0 2.1

Government consumption and investment 2,967.2 0.6 -3.1 -2.0 -0.9 -0.3

Private fixed investment 1,703.5 -0.2 6.6 9.4 6.9 6.9

- residential investment 354.2 -3.7 -1.4 11.7 9.4 12.4

- equipment and softw are 898.3 8.9 11.0 8.3 6.9 6.0

- non-residential structures 451.1 -15.6 2.8 10.2 4.5 3.5

Stockbuilding* -154.2 1.5 -0.2 0.2 0.1 0.0

Exports 1,587.5 11.1 6.7 4.3 5.2 5.3

Imports 1,976.2 12.5 4.8 4.2 5.7 5.4

GDP 2.4 1.8 2.2 2.0 2.2

Nominal GDP (USDbn) 13,973.7 14,498.9 15,075.7 15,716.1 16,276.1 16,885.0

Unemployment rate, % 9.6 9.0 8.1 7.7 7.3

Industrial production, % y/y 5.4 4.1 4.0 4.0 4.3

Consumer prices, % y/y 1.6 3.1 2.1 2.2 2.2

Consumer prices ex. energy and food, % y/y 1.0 1.7 2.1 2.2 2.2

Hourly earnings, % y/y 1.8 2.0 2.2 2.1 2.2

Current account (USDbn) -442.0 -465.9 -471.5 -569.7 -506.5

- % of GDP -3.0 -3.1 -3.0 -3.5 -3.0

Federal budget balance (USDbn) -1,293.5 -1,300.0 -1,100.0 -900.0 -700.0

- % of GDP -8.9 -8.6 -7.0 -5.5 -4.1

Gross public debt, % of GDP 95.2 99.5 106.5 112.0 116.2

* Contribution to GDP growth (% points)

After all, the economy’s fundamentals are much improved.

Businesses are highly profitable, banks have recapitalised

and the deleveraging process in the private

sector has come a long way. Still, households –

especially younger families – are likely to continue the

process of balance sheet repair. Home prices seem to

have bot-tomed, but the expected slow price increases

provide lim-ited support to household net worth going

forward.

In 2014 growth is expected to slow to a pace more in line

with potential. Full employment, defined as an unemployment

rate of 7%, should be achieved in late 2014.

QE3 only in case of policy errors

The effects of the drought in the Midwest on food commodity

prices and a rebound in oil prices are likely to

push headline inflation meaningfully higher by mid-

2013.

With the business cycle adjustment more or less completed

in 2014, signs of stronger underlying inflation

pressures are projected to emerge in the latter part of the

forecast horizon. As a result, we expect the Fed to start

raising policy rates and gradual unwind its securities

holdings around mid-2014.

In the more immediate future, however, the Fed is likely

later this month to postpone the expected first rate hike

from late 2014 to mid-2015. In our view, the central bank

is currently overestimating the labour market slack and

hence underestimating the longer-term risk of inflation.

Additional asset purchases (QE3) by the Fed are not

expected unless the Euro-area crisis blows up again or if

US policymakers fail to resolve the pending fiscal issues

in an orderly manner.

18 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


A perfect storm of fiscal chaos hopefully avoided

Three US fiscal issues pose a threat to the economic outlook:

the so-called fiscal cliff, another increase in the

Treasury debt ceiling and the need for longer-term fiscal

sustainability.

As we approach the end of the year, attention will focus

even more sharply on the risk of the fiscal cliff – the unfortunate

coincidence of about USD 600bn in tax increases

and spending cuts that will take effect next year,

should Congress not act to change current law. Failure to

scale back the fiscal cliff could knock as much as 4¼%

off real GDP in 2013, enough to push the US economy

back into recession. Moreover, the Treasury is likely to

hit the debt ceiling again in December. Assuming it uses

the accounting strategies that have been employed in the

past, the Treasury seems likely to be able to finance government

operations under the current limit until sometime

in February 2013, by which point Congress must

raise the debt ceiling. Failure to do so would imply default

on some of the US government’s obligations.

With both political parties in full campaigning mode,

none of these issues are likely to be resolved before the

presidential elections on 6 November. As seen too often

during the past two years, there will most likely be plenty

of political brinkmanship and the accompanying uncertainty

will probably come at a cost to the economy and

the financial markets later this year and in early 2013.

The longer the uncertainty persists, the more likely it will

hurt confidence, hiring, investment and spending.

However, our expectation is that when pressured by the

threat of another recession, policymakers will take action

to reduce the fiscal drag on growth (to around 0.5% of

GDP) either during the so-called lame duck session after

the election or in January when the new government

takes office. Obviously, the outcome of the November

elections will be very crucial to how the fiscal debate

plays out. In this context, the congressional election results

will be at least as important as who wins the White

House, Obama or Romney.

Extending the otherwise expiring tax cuts and other easing

measures and repealing the automatic federal spending

cuts would significantly reduce the risk of recession,

but at the cost of a substantially larger budget deficit.

Thus, with an extension of current policy federal debt

held by the public would rise from 70% of GDP today to

around 90% by 2022 compared to around 60% if current

law is not changed. In other words, apart from resolving

the fiscal cliff issue and raising the debt ceiling

policymakers will also soon have to address the need to

restore longer-term fiscal sustainability in order to shift

the risk to the economic outlook from negative to

positive.

Johnny Bo Jakobsen

johnny.jakobsen@nordea.com +45 3333 6178

Moving slowly forward

■ USA

Slow progress towards full employment in late 2014

Stronger underlying inflation pressures in 2014

Recession if economy is pushed off the fiscal cliff

19 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS

1

0

-1

-2

-3

-4

-5

%pointsFiscal policy impact on GDP growth % points

Current law Current policy

-5

2011 2012 2013

Source: Nordea Marktes, Congressional Budget Office and Office of

Management and Budget

1

0

-1

-2

-3

-4


Restore confidence to end the recession

Gradual recovery from year-end

Helped by smarter interventions

Significant downside risks to inflation

Spain heading for deeper recession

The Euro area is in recession. The second quarter showed

GDP contraction and the third quarter most likely will

too. We expect a recovery starting around year-end and a

very gradual pick-up of momentum during 2013. In 2014

growth will still be somewhat below the pre-crisis

“normal” level.

We have made a modest upward revision to growth this

year, but otherwise kept the Euro-area forecast roughly

unchanged compared with our May forecast revision. We

have revised down our growth forecast for Spain in 2013

after the announcement of new austerity measures during

the summer.

Recovery from year-end

It is fair to say that signs of recovery have been scant up

to this point. However, the most forward-looking indicators

for growth in the Euro area as a whole have at least

stopped falling and stabilised at low levels.

The contraction in Q2 was not as severe as one might

have expected given the financial stress during that period

with Greek post-election chaos and a Spanish bank

bailout. Some lagged adverse impact on the economy is

likely to be visible in the Q3 growth numbers, but we expect

Q3 to mark the bottom of the current business cycle.

Another reason that the Q2 numbers were not as bad as

feared is Germany. German growth remained resilient

during the first half of the year driven to a large extent by

the export sector and to some extent also the German

consumers. At present, the survey-based indicators point

to slightly negative growth in Germany in Q3.

■ Euro area

Restoring confidence is key to recovery

Why do we expect a recovery when numerous problems

remain unsolved and deleveraging has only just begun?

Well, because we believe that decisions have been taken

and will be taken in the coming months that are decisive

and will help gradually restoring confidence in the Euro

area. After all, monetary policy is extremely lenient, export

markets are growing decently, the EUR is

weakening and even if more fiscal tightening will be

needed in the years to come at least the pace of

tightening will be slower. Confidence is the missing

ingredient that will al-low these factors to work and pave

the way for a very gradual recovery.

Restoring confidence takes more time than eroding it,

and we do not in any expect that the debt crisis is about

to end. Solving the crisis requires massive deleveraging

in the years to come, structural reforms, growth and

building new credible institutions to prevent the same

kind of crisis from happening again. Restoring confidence

also requires that Greece starts implementing the

reforms agreed with the Troika.

Interventions will work this time

In terms of the decisive action, the ECB seems ready to

bring out Big Bertha – more or less the entire arsenal of

instruments is being considered. We believe ECB interventions

in the secondary market – done smarter this

time – combined with intervention in the primary market

by the EFSF/ESM will reduce the level of stress in financial

markets and help restore the confidence that is needed

to embark on a path to recovery.

When the ECB intervened through its old programme

(the SMP) it did not work very well. Rather it reduced

the incentive for eg Italy to do the right thing. Therefore,

interventions to reduce financial stress never became

credible. This time, the ECB will intervene with strict

conditionality – ie only in countries that have a bailout

programme with promises to reduce budget deficits and

Euro area: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (EURbn) 2010 2011 2012E 2013E 2014E

Private consumption 5,128 0.9 0.2 -0.8 -0.4 0.3

Government consumption 1,987 0.7 -0.3 0.2 -0.9 -0.8

Fixed investments 1,735 -0.2 1.6 -3.0 1.1 2.4

Stockbuilding* -48 0.7 0.3 -1.2 -0.1 0.5

Exports 3,272 11.0 6.3 1.6 4.9 1.6

Imports 3,155 9.4 4.1 -2.3 2.9 1.4

Net exports* -0.8 0.7 1.0 1.6 1.0 0.2

GDP 1.9 1.5 -0.4 0.6 1.7

Nominal GDP, EUR bn 8,917 9,155 9,410 9,512 9,725 9,804

Unemployment rate, % 10.1 10.2 11.3 11.6 10.6

Industrial production, % y/y 4.3 2.7 -2.6 2.9 5.8

Consumer prices, % y/y 1.6 2.7 2.2 1.6 1.6

- core inflation** 1.0 1.7 1.6 1.2 1.0

Hourly earnings, % y/y 1.6 2.2 2.3 2.2 2.1

Current account, bn EUR -3.2 -1.1 33.1 21.0 17.0

Current account, % of GDP 0.0 0.0 0.3 0.7 1.0

General government budget balance, % of GDP -6.2 -4.1 -3.7 -3.0 -2.5

General government gross debt, % of GDP 85.3 87.2 90.9 93.9 96.4

* Contribution to GDP growth (% points)

20 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


undertake reforms – which will make actions on both

sides more credible. The ECB can intervene in large

amounts and significantly reduce financial stress because

the ECB does not have to rely on market pressure.

Instead, the crisis bailout country will have to

continuously meet the agreed conditions, or it not only

risks losing access to the cheap bailout loan but also to

the “free” ECB interventions.

Within the next few months we expect Spain to ask for

interventions from the bailout funds and hence from the

ECB. Italy could follow late this year, as it could be a

way for the current premier to secure budget discipline

beyond the April 2013 general elections. Such a political

manoeuvre could make the next government obliged to

continuously meet the conditions that Mr Monti agrees

upon to get ECB support, or the ECB stops intervening.

Limited underlying inflationary pressure

Consumer price increases are likely to remain above 2%

in the coming quarters despite the ongoing recession.

Higher food and energy prices as well as indirect tax

hikes in some countries will keep the headline numbers

elevated. Underlying inflation will, however, gradually

fall throughout most of this year and 2013 before picking

up modestly in 2014. Risks are skewed significantly to

the downside throughout the forecast horizon. Upside

risks to inflation from the very easy monetary policy are

unlikely to materialise within our current forecast

horizon.

Spain heading for deeper recession

Since our most recent forecast update, Spain has taken a

EUR 100bn bank bailout and announced new austerity

measures totalling EUR 65bn until 2014. The bailout of

Spanish banks seems sufficient to cover near-term capitalisation

needs, as it has also been confirmed by independent

consultants. However, the banking sector remains

a key concern as the economy heads deeper into

recession.

Key elements of the austerity package include a VAT

hike from 18% to 21% from September this year and cuts

in benefits and public wages. As a consequence, we have

revised down our forecast for growth in both 2012 and

2013. On a more positive note, we do expect intervention

in Spanish sovereign bonds by the ECB and the rescue

funds and a somewhat reduced level of financial stress.

Anders Svendsen

anders.svendsen@nordea.com +45 3333 3951

Gradual recovery from year-end

Confidence is crucial

Consumer price increases remain elevated

Monetary policy is extremely lenient

■ Euro area

21 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


UK growth stalling – awaiting outside help

The UK economy has been moving at stall speed lately.

Four years after the Great Recession first hit the shores of

the British Isles, the economy is still 4% below its precrisis

peak and the economy has contracted for the past

three quarters.

Lately, several events have been heavily influencing

economic key figures: The Queen’s Diamond Jubilee

gave an extra day off in Q2 that showed up as weakness

in the figures; the weather was horrid, which has

depressed retail sales, and finally the 2012 Olympics is

expected to give an extra (albeit temporary) boost to

consumption and employment during Q3.

We are somewhat puzzled by the development in the

labour market. Employment has increased by 330k over

the past year and while some of those jobs most likely

are related to the Olympics, they have come too early.

This could be an indication that the GDP figures are

underestimating actual growth or a sign of labour

hoarding, which could pose a downside risk if the

economy fails to gain traction.

With the UK government’s continued focus on

downsizing the public sector, growth is expected to come

from a normalisation in exports as export markets

recover and a modest recovery in private consumption

and growing investment (as an aside, with this forecast

total private consumption will still be 1% shy of the 2007

level at the end of the forecast horizon). With industrial

capacity utilisation above 80%, we expect this to drive

investment in new machinery.

The Bank of England (BoE) will keep trying to support

the economy through more asset purchases (we expect

another GBP 50bn to GBP 425bn) and the Funding for

Lending Scheme (FLS) which should give incentives for

banks to increase lending to the real economy.

Steen V. Grøndahl

Steen.grondahl@nordea.com +45 3333 1453

Stalling recovery

Capacity dwindling

Growth slowly recovering

■ United Kingdom

United Kingdom: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (GBPbn) 2010 2011 2012E 2013E 2014E

Private consumption 912.8 1.3 -1.0 0.1 1.7 2.4

Government consumption 327.9 0.4 0.1 1.5 -2.0 -1.5

Fixed investment 208.7 3.5 -1.4 0.6 3.2 6.3

Stockbuilding* 0.9 0.3 -0.1 -0.1 -0.1

Exports 404.2 6.4 4.4 -0.4 3.8 3.2

Imports 424.8 8.0 0.5 2.3 3.3 4.1

GDP 1.8 0.8 -0.4 1.0 1.7

Nominal GDP (GBPbn) 1401.8 1466.6 1516.2 1548.1 1592.1 1641.1

Unemployment rate, % 7.9 8.1 8.4 8.7 8.6

Consumer prices, % y/y 3.3 4.5 3.0 2.2 1.4

Current account, % of GDP -2.5 -1.9 -2.3 -2.1 -1.3

General govt budget balance, % of GDP -10.4 -8.3 -7.6 -6.4 -4.7

Gross public debt, % of GDP 75.7 82.9 89.3 93.2 95.1

* Contribution to GDP growth (% points)

22 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


The challenges remain in the long term

The Japanese economy is undergoing a domestic-led recovery.

As a result of strong post-earthquake restoration

activity, the growth rate in the first half of 2012 averaged

3.2%. The pace of recovery is likely to slow during the

remainder of the year, with reconstruction spending

dwindling and private consumption decelerating as

incentive programmes expire. In the meantime, sluggish

exports to its major trading partners and Japan’s

dependence on energy imports will continue weighing on

its trade balance. As a whole, the economy will expand

by 2.5% annually this year. We believe activity will

decelerate further in 2013 and 2014 to 1.6% and 1.1%.

Private consumption has been the major driver behind the

robust recovery earlier this year, thanks to incentive

programmes for eco-cars. However, the budget for ecocar

subsidies is likely to be used up very soon, so auto

sales will see a significant drop. As a result, private

consumption is estimated to be close to zero by the end

of 2012. Based on prior experiences, a consumption tax

rate hike is likely to accelerate private demand in the

quarters preceding its effective date. Thus, we expect to

see a considerable but temporary upswing in economic

activity in the period between late 2013 and early 2014

due to the consumption tax rate hike effective from April

2014.

Reducing the public debt burden is a top priority, but this

task is complicated by low growth, persistent deflation,

and a rapidly aging population. The consumption tax rate

hike effective from April 2014 is a first step towards

fiscal reforms, but it is far from sufficient to meet the required

adjustment of 10% of GDP over the next decade.

The debt-to-GDP ratio can be stabilised through deep

cuts in social security spending which is the largest and

fastest growing component of government expenditure.

Alternatively, the consumption tax could be hiked further.

Currently, Japan has the lowest tax rate on consumption

among OECD countries. However, both options

require strong political commitment.

Amy Yuan Zhuang

Amy.yuan.zhuang@nordea.com +45 3333 5607

The recovery is losing speed

■ Japan

The tax hike will cause consumption frontloading

Social security biggest share of public expenditure

Japan: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (JPYbn) 2010 2011 2012E 2013E 2014E

Private consumption 277,209 2.5 0.1 1.8 2.1 1.5

Government consumption 93,863 2.2 2.0 1.4 1.3 1.1

Gross fixed capital formation 97,914 0.2 0.9 3.6 1.7 1.2

Stockbuilding* -5,314 0.7 -0.4 1.0 -0.1 -0.2

Exports 59,754 24.5 -0.1 2.2 4.0 4.2

Imports 58,094 11.2 6.3 6.7 5.2 5.0

GDP 4.6 -0.7 2.5 1.6 1.1

Nominal GDP (JPYbn) 471,060 481,857 468,343 487,077 498,279 508,245

Unemployment rate, % 5.1 4.6 4.4 4.3 4.3

Consumer prices, % y/y -0.7 -0.3 0.2 -0.1 -0.1

Current account, % of GDP 3.6 2.0 2.1 2.5 2.4

General government budget balance, % of GDP -9.0 -9.7 -9.9 -9.6 -9.0

* Contribution to GDP growth (% points)

23 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Slowdown under control

Economy losing momentum

Fiscal consolidation likely to be put on hold

Interest rate cuts just a question of time

PLN stronger amid yield hunting

Slowdown underway

Until the end of 2011 Poland seemed to defy economic

gravity, with an acceleration in GDP growth in Q4 last

year despite recessionary tendencies in the Euro area,

which takes up over 50% of Polish exports. However, in

line with our view, the situation has changed early this

year as all drivers of Polish growth shifted into lower

gear.

First, although with some lag, the Euro-area woes have

finally started to bite. The weakening external demand

has been gradually filtering through to the Polish economy

and a long-lasting drop in the inflow of new export

orders negatively affects exports and industrial output.

This time the PLN does not work as an external shock

absorber because it has shown an appreciation trend since

the start of this year, contrary to sharp depreciation in

late 2008 and early 2009 when external demand also

slumped.

Second, the fiscal consolidation that began in 2011 and

continued in 2012 has started to take its toll. Struggling

to escape from an excessive deficit procedure imposed by

the European Commission, the government sharply cut

spending, mainly public investment. This, coupled with

the end of preparations for the UEFA Euro 2012, led to a

notable weakening in activity in the construction sector.

Third, consumption growth is slackening amid a deterioration

of labour market conditions and adjustments of

households’ balance sheets. The latter largely involves a

need to rebuild savings (following a decline in the

savings ratio to historical lows) as there is no major

deleveraging pressure on households given that the

Polish private sector debt to GDP ratio is one of the

lowest in the EU.

■ Poland

Fourth, Polish central bankers have ignored threats to

economic growth until recently and they raised interest

rates in May. This controversial hike made the bank one

of a few central banks in the world fighting inflation instead

of fighting for growth. The move has had an adverse

effect on investment and consumption decisions

and magnifies the negative impact on lending activity of

the tightening of regulations by the Polish FSA.

Given the prolonged economic downturn in the Euroarea,

stronger-than-expected tightening of domestic economic

policy (not only fiscal consolidation, but also interest

rate hikes), we have revised down our GDP growth

forecasts for Poland. Now we predict that the country’s

economic growth rate could dip below 3% this year and

slow down even further in 2013. Compared with its regional

peers and other parts of the EU, Poland would still

outperform, but the slowing growth to below 2% y/y

(and below 0% q/q sa) in some quarters will be a marked

change for the country, which was the only one in the EU

to avoid recession during the first wave of the crisis in

2008-2009 and grew a robust 4.3% in 2011.

Policy response?

We think that the Polish authorities have some tools

available to avoid a deeper slowdown and to keep it under

control. First of all, there is room for some monetary

policy action. Some central bankers have already supported

officially submitted motions to trim rates in July,

but they were a small minority (merely one MPC member

out of 10 supported the motion to cut rates by 50 bp

and only two members voted for a cut of 25 bp). Hawks

raised rates only two months earlier and may not want to

be seen performing a dramatic U-turn now. However, we

believe that in early 2013 at the latest they will gain a

majority on the rate-setting panel. Winning support for

earlier cuts could be problematic given the persistently

high inflation and new upside risks for the headline inflation

rate (tensions in the global food markets and with

food accounting for a large share of the Polish CPI basket).

Positive monetary impulses may be strengthened by

a possible easing of regulations on bank lending.

Poland: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (PLNbn) 2010 2011 2012E 2013E 2014E

Private consumption 810 3.2 3.1 1.9 1.9 3.3

Government consumption 249 4.1 -1.3 -0.1 0.0 2.0

Gross fixed capital formation 285 -0.4 8.1 3.3 -1.9 4.5

Exports 530 12.1 7.5 -3.4 1.9 7.5

Imports 529 13.9 5.8 -5.5 -1.4 7.0

GDP 3.9 4.3 2.8 2.3 3.1

Nominal GDP (PLNbn) 1,344 1,416 1,525 1,625 1,691 1,781

Registered unemployment rate, % 12.4 12.5 13.1 13.2 12.5

Consumer prices, % y/y 2.6 4.3 3.9 2.7 2.2

Current account, % of GDP -4.7 -4.3 -3.6 -3.0 -3.0

General government budget balance, % of GDP -7.8 -5.1 -3.3 -3.3 -2.9

24 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


There is some room to support the economy also on the

fiscal policy side. Government officials have recently announced

that fiscal consolidation would be continued

only if it was not detrimental to economic growth. We

read this as an intention to revise previous ambitious

plans of fiscal deficit reduction to below 1% of GDP by

2015 as it would be a step too far for the slowing

economy. The presentation of a further reform drive in

September, announced by Prime Minister Donald Tusk

before the summer holidays, will most likely be

supplemented by an indication of measures aimed at

stimulating economic activity. However, the room for

manoeuvre in fiscal policy is constrained by EU deficit

rules and domestic prudential limits on public debt.

Moreover, any increase in the government’s investment

spending would not be very effective given the decreased

inflow of EU funds in 2013-2014 (before the new EU

financial perspective for 2014-2020 is fully operational

from late 2014).

Possible policy stimulus will be too little and too late to

avoid a further slowdown during the remainder of 2012

and the first half of 2013, but together with the recovery

in the Euro area it should be enough to make economic

growth in Poland return to an upward trend. Economic

growth beyond 2013 could moreover be fuelled by a

gradual start of large-scale investment in the energy sector

and positive supply side effects of the significant upgrade

of the road infrastructure over the past few years.

Improved credibility

We estimate that Poland will manage to reduce the fiscal

gap to 3-3.5% of GDP in 2012, which will be enough for

the European Commission to remove the excessive deficit

procedure imposed on Poland and for rating agencies

to affirm Poland’s investment grade rating with stable

outlook. By keeping the deficit around 3% in 2013-2014

the government should be able to maintain its restored

fiscal credibility. Also the external relations look favourable

with a moderate current account deficit likely to decline

further amid weakening domestic demand. With

improved credibility and no major economic imbalances,

Poland has been attracting large foreign capital inflows

and become an alternative to such classical safe-havens

as Germany where yields dropped below 0%.

PLN stronger amid yield hunting

As long as the economic slowdown is under control and

the fiscal deficit remains in check, Poland will offer foreign

investors a combination of relatively strong fundamentals

and a yield pick-up. Therefore, we expect Polish

bonds to keep attracting interest and the PLN to remain

on an appreciation path. However, the record-high involvement

of foreign investors in the domestic debt market

is a significant risk factor for the PLN in the event of

a major deterioration of the country’s fundamentals

and/or a surge in global risk aversion.

Piotr Bujak

piotr.bujak@nordea.com +48 22 521 36 51

Euro-area recession is taking its toll

All growth drivers into lower gear

Ambitious fiscal targets likely to be revised

Elevated inflation delays monetary easing

■ Poland

25 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Inflation déjà vu

Solid growth sustained, but softer H2 expected

Inflation acceleration will prompt CBR to act in H2

The Russian economy continued to expand by a

relatively fast pace of 4.4% during H1 supported by

internal factors, but we will likely see a soft patch in Q3

due to a lagged response to the slowdown in export

markets and expected weather-related losses in the

agricultural sector. Household consumption is still the

major source of domestic growth. Supported by a healthy

labour market, consumer confidence is growing,

unemployment has fallen below 6%, supporting real

wage growth, and household credit growth is expanding

above 40% y/y; all factors that support household

spending.

The key risk to growth comes from Europe, as more than

50% of exports go to the EU. However, the negative

effect for growth from export markets is partially offset

by the relatively low impact of net exports on GDP.

Opening up

As was widely expected, Vladimir Putin won the presidential

elections in March for a new 6-year term, and Mr

Medvedev was appointed prime minister. The latest surveys

confirm very high endorsement levels of Vladimir

Putin and Dmitry Medvedev. However, the threat of increasing

dissatisfaction of the middle class along with the

oil-oriented economy, force the current government to

impose reforms in order to improve financial and business

infrastructure. The WTO entry (23 August) is one of

the positive triggers on the way.

Russia is now committed to bringing its laws and practices

into compliance with WTO rules. Russia’s commitments

include non-discriminatory treatment of imports

of goods and services, reduction of tariffs and

binding tariff levels, ensuring transparency when

implementing trade measures, limiting agriculture

subsidies, enforcing intellectual property rights of foreign

holders of such rights and opening government

procurement contract opportunities to foreign firms.

Entering the WTO will make Russia more attractive to

■ Russia

foreign direct investment, which will help the Russian

industry to become more efficient. Russia's exporters will

gain USD1.5-2bn a year from the removal of existing

trading barriers. Lower tariffs on imported goods should

lead to cheaper goods and boost consumers’ spending

power.

The ongoing large government privatisation programme

is another vector of the Russian liberalisation policy. The

USD 32bn privatisation plan in 2012-2014 and government

intention to sell controlling stakes in such backbone

companies as Sberbank, VTB and Aeroflot make us very

optimistic about the effect of the reform. Privatisation

will continue to improve the country’s investment

climate and attract more foreign funds.

Food prices a concern again

Having reached historic lows, consumer prices did not

stay there for long. As expected, consumer price inflation

bottomed out just below 4% y/y in late spring and picked

up visibly over the summer. The favourable food price

effects waned and postponed tariff hikes were introduced

over the summer a few months after the elections.

Food prices are escalating particularly fast: having bottomed

at 1.2% y/y in April, food price inflation has

picked up to 5.5% y/y in July. The recent global food

price increase on supply shortages, similar to the 2010

food price spike, is a real risk for headline inflation for

the rest of the year. The Russian CPI basket is heavily

weighted in food prices (37,3%), which leaves headline

inflation exposed to further global food prices increases.

We expect inflation to accelerate further, with headline

inflation rising above 6% y/y as early as in August, but it

will remain under 7% in coming months unless the RUB

depreciates and other food prices keep accelerating at

previous months’ rates. In any case, we expect the central

bank action and tighter liquidity to help keep inflation

below 8% over the forecast horizon.

Monetary policy to be kept tight in coming quarters

The Central Bank of Russia has kept its key rates unchanged

in the previous quarter, but the post-meeting

Russia: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (RUBbn) 2010 2011 2012E 2013E 2014E

Private consumption 21,203 3.0 6.0 6.2 6.4 6.5

Government consumption 8,067 1.4 1.3 1.4 1.3 1.2

Fixed investment 8,536 6.1 6.5 7.2 7.8 8.0

Exports 10,992 7.1 3.5 3.8 5.5 6.5

Imports 7,954 25.6 14.5 9.5 12.0 12.5

GDP 4.0 4.4 4.2 4.8 5.0

Nominal GDP (RUBbn) 38,807 45,300 47,293 49,280 51,645 54,227

Unemployment rate, % 7.5 6.5 5.8 5.5 5.2

Consumer prices, % y/y 6.9 8.5 6.3 6.8 7.0

Current account, % of GDP 4.8 4.5 4.2 3.0 2.5

Central govt budget balance, % of GDP -4.0 0.5 0.2 0.5 0.7

26 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


communication has shifted from very dovish to rather

hawkish in recent months. It seems that the CBR pays

more attention to accelerating inflation rather than to

signs of slowing domestic growth momentum. The bank

will likely tolerate more sustainable credit and consumption

growth rates going forward, and try to maintain inflation

close to its target of 6% for this year and towards

the government’s 4-5% goal for the coming years.

Now that inflation is accelerating and the risks are to the

upside due to food prices, the CBR will not hesitate to

act by hiking benchmark repo rates in H2 if inflation deviates

from target. In the meantime, the CBR will introduce

effective policy tightening by preventing a rise in

interbank liquidity (by reducing provision via repo, less

FX intervention), which will keep money market rates at

high levels.

RUB wants to break free

The moves to more RUB flexibility continue. The Central

Bank of Russia widened the RUB basket (55% USD

and 45% EUR) floating corridor band by 1 RUB as of 24

July to currently 31.65 – 38.65. The CBR has scaled

down its presence in the FX market significantly over the

past two years, which is part of its attempts to move towards

an inflation-targeting regime.

The widening of the RUB floating band was the fourth

such move since 2010 towards the promised “free float”

by 2014, and we expect similar steps by 6-month intervals

by the end of 2013. Allowing more RUB flexibility

gives more freedom to change rates without the CBR

having to absorb the capital inflows (and increase interbank

liquidity).

With inflation increasing, the CBR will also be biased

towards more RUB strength (each 1% in strength of

RUB effective exchange rate brings headline CPI down

by 0.25%, if sustained), hence expect also “open mouth”

operations each time the RUB weakening risks arise.

A more flexible RUB will be more reactive to market

prices, which creates both strengthening opportunities

and risks. We see a much stronger RUB, on average,

based on our oil forecast of close to USD 120/bbl this

year (above the budget average of USD 100/bbl for the

coming years). We also see Russia being more attractive

for foreign investors, with sovereign debt/GDP barely

around 10%. But the flipside of more RUB flexibility is

that any global factors will hit RUB, with episodes of

weakening along the way.

Aurelija Augulytė

aurelija.augulyte@nordea.com +45 3333 6437

Dmitry Savchenko

dmitry.savchenko@nordea.ru +7 495 777 34 77 4194

Record-low unemployment supports consumers

Inflation accelerating again

The tightening cycle will continue in H2

CBR keeps widening RUB floating bands

■ Russia

27 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Economy remains in a soft patch

Growth continued to moderate in the first half of 2012 in

tandem with weaker prospects in key export markets.

According to the flash estimate, growth slowed to 2.0%

y/y in Q2 from 3.7% at the beginning of the year.

Compared to Q1 GDP grew by a still decent 0.4% (sa).

The modest export growth is attributable to weaker

demand for industrial goods in Europe and reduced

energy exports. Compared to Euro-area peers, Estonian

manufacturing performance has proven relatively

resilient to the ongoing debt crisis, with production down

only 1% y/y by mid-year. To some extent this reflects the

business sectors’ integration with stronger Nordic

countries as well as an ability to adjust to new economic

circumstances. Low investment demand and soft

confidence in the Euro-area are likely to depress exports

in H2, but a gradual recovery is expected from spring

next year.

As expected, the economy has now entered a soft patch.

Growth is driven by domestic demand, which is reflected

in higher contributions from the construction, trade and

information and communication sectors. The increase in

turnover and the favourable cost level continue to support

profit growth and hence investment. Private investment

is largely driven by a need to expand business volumes

and upgrade technologies and production. Two key

investment areas are machinery and equipment, and

buildings and structures. Investment demand is also

reflected in the gradual pick-up of loan demand. Another

bright spot for the economy is consumption and in

particular retail sales as consumer confidence has

recovered to its historical average. Stable labour markets

and moderate wage growth are likely to support retail

sales, with only a slight moderation expected in H2.

Overall, the recovery remains vulnerable to the

resurgence of the sovereign debt crisis. The main

scenario is, however, a gradual pick-up in stronger export

markets such as the Nordics and Germany next year.

Tönu Palm

tonu.palm@nordea.com + 372 628 3345

Annika Lindblad

annika.lindblad@nordea.com + 358 9 165 59940

■ Estonia

Manufacturing has stabilized, headwinds remain

Corporate income and profits have largely recovered

Only slight moderation in retail sales expected

Estonia: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (EUR bn) 2010 2011 2012E 2013E 2014E

Private consumption 7.41 -1.7 4.2 3.8 3.4 3.7

Government consumption 3.05 -1.1 1.6 2.0 0.9 1.2

Fixed investment 2.97 -9.1 26.8 10.0 6.5 7.0

Exports 8.96 22.5 24.9 3.7 6.5 6.5

Imports 8.15 20.6 27.0 6.5 6.8 6.6

GDP 2.3 7.6 2.3 3.5 3.8

Nominal GDP (EURbn) 13.84 14.3 16.0 16.9 18.0 19.2

Unemployment rate, % 16.9 12.5 10.8 9.9 8.9

Consumer prices, % y/y 3.0 5.0 3.7 3.0 2.9

Current account, % of GDP 3.8 2.1 -2.3 -1.5 -1.3

28 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Economy keeps delivering positive surprises

The economy keeps delivering positive surprises for the

second consecutive year. After a 6.9% y/y expansion in

Q1 2012, the preliminary GDP estimate for Q2 showed

an increase of 5.1%. Quarterly growth was estimated at

1.0% (sa), unchanged from Q1. Export demand appears

to have been an important driver of growth as the

industrial volume index grew by 1.8% q/q and the value

of exports kept increasing. Fixed investment has likely

been driving domestic demand, while retail sales

stagnated compared to Q1. While we expect growth to

slow in H2 as a result of the Euro-area debt crisis

weighing on demand in main export markets and

statistical base effects, we have increased our growth

forecast for 2012 to 4.2%.

Public finances are sound. The budget deficit is likely to

remain below 3% of GDP even after the VAT base rate

cut from 22% to 21% in July, while net public debt is

slightly above 30% of GDP. The state treasury’s total

deposits with the Bank of Latvia exceed EUR 1.6bn or

about 8% of GDP, which is enough to cover the budget

deficit and meet other obligations throughout 2012 and

2013. However, the first signs of external imbalances are

appearing. Although this is still not worrying, the current

account deficit is estimated to be just below 3% of GDP

in H1 2012. The reduction of indirect taxes is moreover

likely to slightly boost imports in H2.

Inflation is slowing largely due to the VAT cut.

Lowering the VAT can be interpreted as a signal that the

government is serious about adopting the euro in 2014.

Especially the inflation criterion is subject to many risks

beyond the government’s control, including global food

prices. The 12M average inflation rate in Latvia is still

slightly above the 3% currently required. The inflation

criterion currently includes for example Greece where

inflation is slowing, which is likely to push the criterion

lower. At the same time an increase in food prices would

have a significant impact on inflation in Latvia as the

weight of food in the consumption basket is among the

highest in the EU.

Andris Strazds

andris.strazds@nordea.com + 371 6 7096 096

GDP still on a steady upward trend

Latvian exports gaining market share

Inflation slowing, but above the criterion

■ Latvia

Latvia: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (LVLmn) 2010 2011 2012E 2013E 2014E

Private consumption 8,026 0.4 4.4 3.5 2.6 3.8

Government consumption 2,557 -9.7 1.3 0.5 1.0 1.0

Fixed investment 2,820 -12.2 24.6 15.2 4.5 7.8

Exports 5,742 11.5 12.6 6.2 4.0 6.3

Imports 5,935 11.5 20.7 6.3 4.5 6.8

GDP -0.3 5.5 4.2 2.5 3.9

Nominal GDP (LVLmn) 13,070 12,739 14,161 15,080 15,830 16,890

Unemployment rate, % 18.7 16.2 15.7 14.5 12.8

Consumer prices, % y/y -1.1 4.4 2.3 2.5 2.8

Current account, % of GDP 3.0 -1.2 -3.2 -3.5 -3.6

29 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Showing resilience

The Lithuanian economy remains resilient to the ongoing

European sovereign debt crisis and continues to

grow albeit at a slower pace than in 2011. Annual

economic growth slowed to 3.9% in Q1 2012 and further

to 2.1% in Q2 2012, but is forecasted to remain positive,

averaging 2.7% and 3.3% in 2012 and 2013, respectively.

Weaker-than-anticipated growth in Q2 2012 was above

all the result of a temporary shutdown of the Orlen

LiLetuva refinery (from end-April to mid-June) that

accounts for close to 30% of all industrial production in

Lithuania. Consequently, industrial production

contracted by 2.8% in Q2 2012 whereas excluding the

production of refined petroleum products, industrial

production continued to grow at a robust 6.2% y/y.

After the temporary slowdown in April, retail trade

growth accelerated to 4.9% y/y in June with growth of

non-food items increasing to 12.1% y/y. Stable

household sentiment suggests that retail trade growth

should remain in positive territory in coming months. As

a result, private consumption will continue to play a

leading role in Lithuanian economic growth.

Inflationary pressures eased in Q2 2012, but average

annual inflation still stood at 3.6% in July – well above

the Maastricht convergence criterion of approximately

3.0%. Even though inflation is expected to moderate to

3.0% by the end of 2012, there is still a high probability

that Lithuania will not be able to meet the Maastricht

inflation criterion in early 2013.

The budget deficit is gradually declining and is expected

to fall below 3% of GDP in 2012. Nonetheless, in case of

a more severe recession in the Euro zone, there is a risk

that the deficit will exceed the 3% mark and thus fail to

meet the euro convergence criteria. Overall, we see euro

adoption in 2014 as an unlikely scenario at the moment.

Žygimantas Mauricas

zygimantas.mauricas@nordea.com + 370 5 2657 198

■ Lithuania

Resilience of retail trade and industrial production

Meeting Maastricht inflation criterion is a big “if”

Budget deficit declining in line with expectations

Lithuania: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (LTLmn) 2010 2011 2012E 2013E 2014E

Private consumption 63,497 -4.9 6.1 3.5 3.2 3.3

Government consumption 20,180 -3.3 0.2 0.7 1.8 2.0

Fixed investment 15,808 1.0 17.1 4.7 7.0 7.2

Exports 50,000 17.4 13.7 3.0 6.5 6.5

Imports 51,372 17.3 12.7 3.8 6.9 6.8

GDP 1.4 5.9 2.7 3.3 3.5

Nominal GDP (LVLmn) 91,913 95,074 106,019 112,100 118,800 126,500

Unemployment rate, % 17.8 15.4 14.0 12.8 11.5

Consumer prices, % y/y 1.3 4.1 3.0 2.8 3.0

Current account, % of GDP 1.1 -1.6 -2.7 -3.0 -3.0

General govt budget balance, % of GDP -7.2 -5.5 -2.7 -3.0 -3.0

30 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Stability, stability and … stability

Stabilising growth is once again top priority

Leadership change in the spotlight

A close eye on local government stimulus plans

CNY volatility persists

Growth target is not imperilled

The government-induced slowdown in China as a part of

the transition towards a sustainable consumption-driven

economy ran into stronger-than-anticipated headwinds in

the first half of 2012. The uncertain outlook has

prompted the authorities to make stable growth on top

priority. The latest monetary and fiscal stimulus

measures will support growth in the second half of this

year.

In the near term, China’s economy remains vulnerable to

external risks. According to Commerce Minister Chen

Deming, China may risk not achieving 10% export

growth this year. Despite emphasis from Beijing, private

consumption has not taken the lead in driving growth.

While we expect it to take a bigger role in future, this

will not happen anytime soon. Looking forward, China

will continue relying on investments, the remaining

growth engine, to ensure a steady growth rate. We

estimate GDP to grow by 8-8.5% in our forecast period

2012, 2013 and 2014.

Falling inflation makes room for monetary easing

Inflation has decreased as expected due to moderating

meat prices and basis effects. Full-year inflation will be

comfortably below the government’s target of 4%. The

record-high global grain prices are likely to have little

impact on Chinese inflation. China is self-sufficient in

corn and wheat and it had a robust harvest this year. The

biggest impact on China's food inflation will be rising

soybean prices, since 80% of the domestic consumption

is imported. However, based on experience from 2008,

the effect will not be significant.

With the low inflation and uncertain growth outlook, the

political stand has shifted from balancing growth and inflation

towards emphasising growth. We expect to see

■ China

another rate cut before the end of Q3. Credit demand has

fallen according to People’s Bank of China’s quarterly

survey of bankers, so monetary tools may prove to be

less effective now. Thus, the central bank will remain

cautious in fear of increasing inflationary pressure and

misleading the markets regarding real estate controls.

Princelings to rule the country

The fifth generation of leaders since the establishment of

the People’s Republic of China will take over power in

the autumn of 2012, when the 18th National Party’s Congress

is set to take place in Beijing. The Politburo Standing

Committee, the most powerful decision-making body

in China, will replace all but two of its nine members. A

handful of senior officials are seen as the likely candidates

to join the prestigious and secretive group. Most of

them come from prominent families within the Communist

Party, the so-called “Princelings”. They are better

educated and more internationally-oriented than their

predecessors. We believe the event will go smoothly, as

the internal power struggles are probably resolved during

the top official meeting in Beidaihe in early August. We

do not expect any major reforms to be launched in the

near future after the shift of power, since stability is valued

over change.

Not only will the top leadership be replaced, but in the

country’s 31 provinces and province-level municipalities,

361 cities, 2,811 counties and 34,171 townships, millions

of party members are also in the middle of being reshuffled.

Regional GDP has traditionally been a measure to

evaluate their performance, so in the upcoming months

we will see intensified local emphasis on boosting

growth, mainly through investments.

Property market – a balancing act

China’s property market was once dubbed the “most important

sector in the entire global economy”. It remains a

big fear hanging over the policy makers. The challenge is

to balance between on the one hand bringing down house

prices and increasing housing affordability and on the

other hand preventing the cooling property sector’s

negative spill-over on the domestic economy. The latest

modest rebound in house prices could be a result of the

China: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (CNYbn) 2010 2011 2012E 2013E 2014E

Private consumption 12,113 9.1 5.8 9.0 9.1 10.0

Government consumption 4,569 9.0 12.9 8.9 8.8 9.0

Fixed investment 15,668 22.5 11.4 8.5 9.2 9.0

Stockbuilding* 778 0.5 0.2 -0.4 0.0 0.1

Exports 9,106 -10.3 28.4 8.5 8.5 9.1

Imports 7,603 4.1 20.1 8.6 10.0 11.0

GDP 9.2 10.5 8.0 8.3 8.5

Nominal GDP (CNYbn) 34,632 39,431 45,590 50,655 56,986 64,394

Unemployment rate, % 4.1 4.1 4.1 4.1 4.1

Consumer prices, % y/y 3.3 5.4 3.1 4.0 3.8

Current account, % of GDP 5.1 2.8 2.5 2.2 1.5

General government budget balance, % of GDP -1.7 -1.1 -1.5 -2.3 -1.9

* Contribution to GDP growth (% points)

31 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


policies to encourage real housing demand, but it may

also reflect a misreading of central government policy.

Evidence suggests that some local governments have

eased property restrictions surreptitiously regarding

multiple housing purchases, hoping to revive

construction jobs and land sales. We believe the central

government will maintain its favourable policies for firsttime

home buyers, while continuing to rein in speculative

demand and tighten control of local implementations.

Local officials should be kept on a tight leash

The only economic anxiety to rival the housing market is

the local government’s investment plans which should

not be neglected. After recognizing that the 4trn yuan

package in 2008 was a mistake that left the country with

stubborn inflation, messy local-government finances and

skewed investments, the Politburo has rejected that its

2012 stimulus efforts might entail the same loss of discipline

as in 2008. However, this view is not shared by the

local authorities, which have all developed their own

ambitious plans. The most remarkable case is the Guizhou

province’s 3trn yuan investment on culture and

tourism, which is more than five times its 2011 GDP.

Even though not all projects will be approved by the central

administration, the local authorities have their ways

to circumvent the rules.

These projects will be financed through local government

financing vehicles which have already accumulated huge

off-balance-sheet debt. Several unofficial sources have

given their estimates on the size of the total local debt,

ranging from 50% to more than 100% of GDP (27% by

official auditors). The high indebtedness raises concern,

as the profitability of these projects and their ability to

service the debt is doubtful. Numerous infrastructure

projects have been found in poor quality without the

ability to withstand bad weather conditions. A

government study showed 30% of the 4trn investments

from 2008 have failed. In addition, the local investment

plans are more likely to cause inefficient resource

allocation and overcapacity than if it was managed from

the central.

CNY to continue its two-way volatility

The intensified slowdown in China has had a spill-over

on the CNY which has weakened remarkably against the

USD since May. Premier Wen Jiaobao has reiterated that

the CNY is near its fair value and that a liberalised currency

is not necessary a stronger currency. With the

shrinking current account deficit and sluggish economic

outlook, the top officials have an incentive to let the

CNY continue its weakening course in the short term. In

the longer term, we expect the CNY appreciation to continue,

mainly because of the strong underlying growth in

China. The appreciation of the CNY is by no means over,

although we see a slower and more volatile trend ahead.

Amy Yuan Zhuang

Amy.yuan.zhuang@nordea.com +45 3333 5607

A steady GDP growth is desired

Property prices show signs of mild recovery

■ China

Most investment funding through financial vehicles

Continued CNY volatility ahead

32 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


A drought of growth

Economic activity in India began decelerating in late

2011 and the conditions have only deteriorated during the

first eight months in 2012, hampered by both domestic

and global factors. External demand has weakened

following the slowdown in developed countries and

China. The domestic economy is severely hit by the poor

monsoon (20% below normal) that led to falling

agricultural production and dropping rural incomes.

Despite falling over several months, WPI inflation,

India’s key inflation measure, still has not moved closer

to the central bank’s comfort level of 5%. The belownormal

rainfall this year will hurt the crop output as 60%

of the production is rain-fed. The resulting higher food

prices and elevated fuel prices will keep inflation above

the 5% mark in the short term. Consequently, the

Reserve Bank of India is unable to utilise its monetary

tools to support the downward-trending economy. Thus,

as inflation remains a major concern we expect the

central bank to leave the repo rate unchanged at 8% this

year. The stubbornly high inflation also erodes

households’ purchasing power and dampens private

consumption.

The slowdown in India is not only cyclical but also

structural. The unhealthy public finances of the country

prevent fiscal policy from being eased to boost growth.

In fact, the weaker INR from the beginning of the year

has further increased the fuel subsidy bill and hence

public expenditure, as import prices have surged. Deficit

and debt as a percentage of GDP are approaching the

levels seen in southern Europe. Standard & Poors and

Fitch already cut their outlook for India to negative. With

parliamentary election scheduled for 2014 and the weak

position of the current government, it seems likely that it

will maintain stability at the expense of reforms in retail

industries and a reduction of fuel subsidies.

Regardless of the recent decline in the economy, we

continue to take a positive view on India’s long-term

growth. This is primarily based on the favourable

demographics and large pool of available labour.

Amy Yuan Zhuang

Amy.yuan.zhuang@nordea.com +45 3333 5607

Weak domestic economy weighed on growth

WPI inflation kept above the comfort level

Public finances to deteriorate additionally

■ India

India: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (INRbn) 2010 2011 2012E 2013E 2014E

Private consumption 37,081 8.1 5.5 5.5 6.5 8.0

Government consumption 7,743 7.8 5.1 5.2 6.0 5.5

Fixed investment 20,418 -16.8 5.5 5.5 8.0 9.8

Exports 13,000 15.6 18.5 9.5 12.0 16.0

Imports 16,469 9.6 9.5 12.0 13.0 15.0

GDP 9.6 6.9 6.0 6.7 7.2

Nominal GDP (INRbn) 64,574 76,741 88,558 100,071 113,080 128,911

Wholesale prices, % y/y 9.6 9.5 7.5 6.8 7.0

Current account, % of GDP -3.3 -2.8 -4.0 -3.0 -2.2

General government budget balance, % of GDP -3.6 -6.6 -7.0 -7.5 -8.0

33 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Slow BRIC healing

The economy has disappointed in the first half of this

year with industrial production again dragging down

growth. It seems, however, that the worst is behind us

and even though manufacturing indices are still reflecting

contraction, recent activity and business confidence

readings show improvement. The government announced

a number of supply-side initiatives to support industry,

including an increase in public infrastructure spending

and concessions to the private sector as well as lower

energy and payroll tariffs. Private sector demand remains

supported by a continuous decline in unemployment, and

retail sales have rebounded strongly over the past few

months helped also by a reduction in credit rates and

taxes. This supports our expectation that GDP growth

will move back above 4% y/y by Q4 this year.

The central bank of Brazil continued its aggressive

monetary policy easing this year, cutting the benchmark

SELIC rate from the peak of 12.5% last year to 8.00%

currently. With signs of improved economic momentum

and more optimistic policymakers, we believe the easing

cycle has ended, with the risk tilted towards just one

more rate cut. After having approached the central bank’s

target (4.5%) earlier this year, inflation has begun to

accelerate again. This trend will likely continue and

eventually force policymakers to start tightening in late

2013.

The Brazilian central bank chose to tolerate further BRL

weakness early this year, allowing the USD/BRL to

weaken to the 2.00 level which the markets have

perceived as the bank’s comfort zone (judging from

intervention patterns). We expect gradual BRL

strengthening going forward, supported by commodity

prices and the end to the policy easing cycle. Notably,

policymakers have achieved a rebalancing of capital

inflows because over the past years as portfolio inflows

have declined, the more stable foreign direct investment

flows have grown. This should help prevent disorderly

BRL moves when global capital flows shift.

Aurelija Augulytė

aurelija.augulyte@nordea.com +45 3333 6437

Growth stabilising

Policy easing cycle nearing the end

More balanced capital inflows

■ Brazil

Brazil: Macroeconomic indicators (% annual real changes unless otherwise noted)

2009 (BRLbn) 2010 2011 2012E 2013E 2014E

Private consumption 1,979.8 7.0 4.5 4.3 4.8 5.5

Government consumption 687.0 4.0 3.0 3.2 3.0 3.0

Gross fixed capital formation 585.3 22.0 6.0 3.0 6.5 7.4

Exports 355.7 11.5 8.5 6.6 7.0 8.0

Imports 360.8 36.3 12.8 6.9 7.2 9.0

GDP 7.6 2.8 2.6 4.6 4.8

Nominal GDP (BRLbn) 3,239.4 3,721.5 3,825.7 3,925.2 4,105.7 4,302.8

Unemployment rate, % 6.7 6.0 5.7 5.6 5.7

Consumer prices, % y/y 5.0 6.4 5.2 5.4 5.8

Current account, % of GDP -2.3 -2.1 -2.5 -2.7 -2.8

General government budget balance, % of GDP -2.7 -2.4 -2.0 -2.1 -2.2

34 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Oil prices stay high but spare capacity buffer should build

Oil prices are expected to remain high over the forecast

period as the market will remain tight by historical

standards. Supply additions are expected to outpace

demand growth resulting in slightly softer oil balances in

2013. The market will remain similarly tight in 2014 as

supply growth slows and demand accelerates with the

global economy. Oil prices will likely remain volatile

around high levels given the market tightness and risks to

supply.

Income growth, economic activity and population growth

are vital drivers of oil demand. Global oil demand is

expected to increase at a higher pace in 2013-14 than in

the prior two years as economic growth picks up. OECD

demand will continue to decline owing to efficiency

gains, fuel switching and subdued economic growth.

Non-OECD countries contribute to all oil demand

growth, which averages 1.1mb/d over 2013-14.

Structurally higher economic growth, rising income and

population growth in emerging economies is expected to

outweigh efficiency gains in oil use and switch to other

energy sources. Demand for transportation is expected to

remain the primary driver of global oil use, accounting

for around 52% of total oil demand.

Global oil supply is expected to grow in the forecast

period mainly driven by a healthy expansion of oil

production capacity in North America, Iraq, Brazil and

OPEC NGLs. Non-OPEC is expected to account for the

lion’s share of new capacity brought online. We expect

the past few years’ impressive growth in US shale

oil/tight oil and Canadian oil sands production to

continue, although infrastructure and environmental

issues may restrain future advances. In Brazil local

content requirements and cost inflations could continue

to challenge the country’s expansion plans. We only

foresee a slight resumption of the oil production in

Libya, Yemen and Sudan/South Sudan in the forecast

period after political unrest has cut oil production in total

by around 1 mb/d. OPEC capacity is expected to increase

in the forecast period. Capacity expansions in Iraq,

Angola, United Arab Emirates and the return of Libyan

oil are expected to outmatch the natural production

/sanctions related declines in Iran and smaller declines in

Nigeria and Venezuela. How long Iran could stand the

EU/US imposed sanctions is uncertain. We expect

production to gradually resume in late 2013, but the

political situation could take a twist for the better or

worse before/after this time. Political unrest and

unplanned production outages are expected to leave

global oil supply at risk.

Bjørnar Tonhaugen

bjornar.tonhaugen@nordea.com +47 2248 7959

Thina M. Saltvedt

thina.margrethe.saltvedt@nordea.com +47 2248 7993

Oil price forecasts Brent – baseline (USD/barrel)

Q1 Q2 Q3 Q4 Year

2011 106 115 112 110 111

2012E 118 109 112 109 112

2013E 108 110 112 114 111

2014E 114 114 116 116 115

Source: Nordea Markets

Supply growth to outpace demand growth

OPEC spare capacity to increase from low levels

Oil price baseline, high and low risk scenarios

■ Oil

35 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Metal prices scratching the bottom for now

Base metals prices have trended lower since March as the

economic slowdown gathered pace driven by Euro-zone

woes. China’s demand for metals has slowed, but a

gradual pick-up in the country that consumes 40% of the

world’s industrial metals output is expected already in

the latter part of this year as infrastructure projects are

fast-tracked to support growth. Long-term prospects for

metals demand are robust despite the current slowdown,

leaving pressure on supply to continue expanding. Metals

markets are expected to tighten gradually and prices to

rise from the current low levels compared to costs.

Aluminium producers are experiencing the second-worst

year since 1982 as low prices have persisted longer than

expected. The current situation is unsustainable in the

medium term and further capacity cuts are expected.

Demand outside Europe and Japan is expected to grow

robustly as aluminium continues to win market share due

to its flexible uses and cost-competitiveness. The project

pipeline in the World ex China is practically dry beyond

2013, while Chinese capacity expands strongly. Low

prices will persist for longer than previously expected

before they realign with industry costs at higher levels.

Copper supply is improving and the outlook for supply

over the forecast period looks better than in a long time.

Demand is expected to recover over the forecast period,

led by China, and keep pressure on copper suppliers to

deliver according to plans. An increasing share of copper

supply will come from new projects (greenfields)

especially in 2014, leaving the likelihood for disruptions

high. Copper prices are expected to remain high and

firmly above the long-term incentive price of USD 6,500

per tonne, thus underpinning greenfield projects.

Nickel prices continue to underperform on expectations

of steady supply additions. The market is expected to

remain in surplus over the forecast period, leading to

inventory build-ups despite a gradual recovery in

demand. Supply from the new generation of nickel

production (HPAL) has been mixed, but is expected to

contribute to a larger share of total supply, but with risks

of delays and technical setbacks. Nickel prices are

expected to increase from current levels which are

considered too low compared to production costs in the

long run.

The zinc market will remain in surplus in the first part of

the forecast period, but a gradual tightening of the market

is expected to commence in 2014 as a number of old

mines approach the end of their life. The currently

depressed zinc prices are expected to recover gradually

before higher prices are required to balance supply and

demand in the latter part of the forecast horizon.

Bjørnar Tonhaugen

bjornar.tonhaugen@nordea.com +47 2248 7959

Base metal price forecasts (USD per tonne)

2012E 2013E 2014E

Aluminium 1,967 2,225 2,450

Copper 7,865 8,025 7,950

Nickel 17,463 18,625 19,750

Zinc 1,926 2,100 2,300

Source: Nordea Markets

Base metals prices

Copper and aluminium forecast

Nickel and zinc forecast

■ Metals

36 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Back on track

With plenty of negative headlines and few signs of the

Great Recession loosening its grip, it is easy to succumb

to gloom and doom. Sometimes though, the darkest hour

is just before the dawn. In this scenario we try to

highlight a few events which could help create a growth

surprise.

The German Constitutional Court rules that the ESM is

not in violation of German law and at the same time

European officials fast-track the creation of the common

banking supervisor, which comes into action before the

end of the year. The ESM comes into action and

immediately starts to replenish bank capital directly and

to buy bond issuances of peripheral Euro-zone countries.

In the US, the fiscal cliff is avoided as a political

solution is found that prolongs the current tax cuts

for everybody, military spending and entitlements

are cut slightly and work on medium-term balancing

of US finances resume.

Chinese officials loosen fiscal policy, economic

growth comes slowly back to life in Europe and

China continues its push to grow domestic demand

by expanding health insurance and lowering interest

rates. Growth moves above 8% again.

Massive pressure from the US, the G20 and the

IMF convinces European politicians that focus needs

to be on balancing structural budgets over the

medium term, allowing fewer tax hikes and few or

no cuts in government spending.

With the negative feedback loop between banks and

sovereigns in Europe finally broken, businesses and

consumer confidence gets a big boost and business

finally dare to invest again. Consumers loosen their

purse strings slightly.

Oil demand increases but continued exploration

after shale oil keeps oil prices from moving too high.

Much of the current slowdown can be attributed to the

negative feedback loop from shaky government finances,

worries about the survival of the Euro zone – and simply

fear of what the future has in store.

If governments can finally convince investors and

consumers that they are on top of the situation in Europe,

investors might offer governments a bit more time to

allow policies to work, interest rates in peripherals will

come down, worries about sovereign defaults will

subside, businesses will start to invest again and

consumers will be willing to increase consumption. A

normal recovery will start to unfold with an extra boost

from low interest rates and pent-up demand.

Steen V. Grøndahl, CFA

steen.grondahl@nordea.com +45 3333 1453

Scenario forecast

World GDP growth %

- USA

- Euro-zone

- China

Global Inflation (CPI) %

- US

- Euro-zone

- China

Unemployment %

- US

- Euro-zone

- China

Budget deficits %

- US

- Euro-zone

- China

Financial indicators

- US 3M LIBOR

- US 10Y Treasury

- EZ 3M Euribor

- DE 10Y Bund

- EUR/USD

- Brent Oil

■ Alternative scenario 1

2011 2012E 2013E 2014E

3.8 3.2 4.1 4.9

1.8 2.2 2.8 3.4

1.5 -0.6 1.2 2.7

10.5 8.2 8.6 9.0

4.1 2.6 3.1 2.9

3.1 2.3 2.8 1.9

2.7 2.4 2.8 3.1

5.4 3.1 3.8 4.0

9.0 8.1 7.3 6.4

10.2 11.4 11.7 11.0

4.1 4.1 4.0 3.9

-8.6 -6.0 -4.2 -3.5

-4.1 -3.5 -2.1 -0.9

-1.1 -2.6 -2.2 -2.2

0.34 0.45 0.85 2.25

2.79 1.80 2.70 3.90

1.39 0.66 0.50 1.60

2.65 1.55 1.85 2.60

1.30 1.22 1.10 1.00

111 107 125 125

37 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


That sinking feeling

As European leaders return from their holidays, they are

once more forced to deal with a deteriorating economic

outlook. The situation in Southern Europe is dire but

many other developed economies are holding up

reasonably well. That might change. In this scenario we

try to list a few things that can sink growth further.

Northern European countries are sticking to the

Merkel doctrine of hard austerity. At the same time,

voters send clear signals not to allow any more

bailouts.

ECB is unable to intervene in European bond

markets due to stiff opposition from the Bundesbank

and likeminded central banks. Their only option is to

cut rates to zero, do more LTRO and loosen

collateral demands, but that is about it.

With continued turmoil in Europe and worries about

the fiscal situation in the US, companies freeze on

investments and hirings. The uncertainty and the

beginning job losses feed directly into private

consumption and house prices take another dive

exaggerating the drop in consumption.

Oil prices drop below USD 80 a barrel (but

averages USD 80 a barrel for the year) which

supports disposable income growth especially in the

US.

With major export markets slowing, the Chinese

economy slows during the first half of the year but

more rate cuts from PBoC as well as directed

investments from the Chinese government provides

a gentle lift to Chinese economy in the second half

of the year.

Flight to safety is in effect with investors fleeing to

the Nordics, Germany, the US and the UK (and

selected other countries). Spreads on peripherals

widen further and yield on Spanish and Italian bonds

top 8%.

In our downside risk scenario, World GDP is expected to

increase by 1.5%. This might seem high but bear in mind

that from 1982 to 2007, World growth averaged 3.5% –

but also that GDP dropped 0.6% in 2009.

An added cause for worry is that much of the fiscal

firepower has been spent in the aftermath of the financial

crisis, making it more difficult to arrest the development

should growth take a turn for the worse.

Steen V. Grøndahl, CFA

steen.grondahl@nordea.com +45 3333 1453

Scenario forecast

World GDP growth %

- USA

- Euro-zone

- China

Global Inflation (CPI)

%

- US

- Euro-zone

- China

Unemployment %

- US

- Euro-zone

- China

Budget deficits %

- US

- Euro-zone

- China

Financial indicators

- US 3M LIBOR

- US 10Y Treasury

- EZ 3M Euribor

- DE 10Y Bund

- EUR/USD

- Brent Oil

■ Alternative scenario 2

2011 2012E 2013E 2014E

3.8 2.8 1.6 3.1

1.8 1.9 0.8 2.7

1.5 -0.7 -2.0 0.0

10.5 7.4 6.2 6.7

4.1 2.5 1.6 1.4

3.1 2.0 1.0 1.2

2.7 2.5 2.1 1.2

5.4 3.2 1.7 1.8

9.0 8.4 9.2 8.7

10.2 11.4 12.1 12.0

4.1 4.3 5.0 5.6

-8.6 -7.2 -6.5 -6.0

-4.1 -3.6 -2.8 -2.6

-1.1 -2.8 -3.1 -3.2

0.34 0.40 0.40 0.60

2.79 1.70 1.20 1.60

1.39 0.60 0.25 0.25

2.65 1.50 0.90 1.20

1.30 1.22 1.18 1.18

111 111 82 92

38 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


Economic Research Nordea

Denmark:

Helge J. Pedersen, Global Chief Economist

helge.pedersen@nordea.com, tel. +45 3333 3126

Johnny Bo Jakobsen, Chief Analyst

johnny.jakobsen@nordea.com, tel. +45 3333 6178

Anders Svendsen, Chief Analyst

anders.svendsen@nordea.com, tel. +45 3333 3951

Jan Størup Nielsen, Senior Analyst

jan.storup.nielsen@nordea.com, tel. +45 3333 3171

Amy Yuan Zhuang, Senior Analyst

amy.yuan.zhuang@nordea.com, tel. +45 3333 5607

Aurelija Augulyte, Analyst

aurelija.augulyte@nordea.com, tel. +45 3333 6437

Georg von Wowern, Assistant Analyst

georg.von.wowern@nordea.com, tel. +45 3333 6102

Henrik Lorin Rasmussen, Assistant Analyst

henrik.l.rasmussen@nordea.com, tel. +45 3333 4007

Daniel Freyr Gustrafsson, Assistant Analyst

daniel.freyr.gustafsson@nordea.com, tel. +45 3333 5115

Finland:

Roger Wessman, Chief Economist Finland

roger.wessman@nordea.com, tel. +358 9 165 59930

Pasi Sorjonen, Senior Analyst

pasi.sorjonen@nordea.com, tel. +358 9 1655 9942

Annika Lindblad, Analyst

annika.lindblad@nordea.com, tel. +358 9 1655 9940

Norway:

Steinar Juel, Chief Economist Norway

steinar.juel@nordea.com, tel. +47 2248 6130

Erik Bruce, Chief Analyst

erik.bruce@nordea.com, tel. +47 2248 4449

Thina M. Saltvedt, Senior Analyst

thina.margrethe.saltvedt@nordea.com, tel. +47 2248 7993

Katrine Godding Boye, Senior Analyst

katrine.godding.boye@nordea.com, tel. +47 2248 7977

Bjørnar Tonhaugen, Senior Analyst

bjornar.tonhaugen@nordea.com, tel. +47 2248 7959

Michael H. Cook, Assistan Analyst

Michael.hurum.cook@nordea.com

■ Economic Research Nordea

Sweden:

Annika Winsth, Chief Economist Sweden

annika.winsth@nordea.com, tel. +46 8 614 8608

Torbjörn Isaksson, Chief Analyst

torbjorn.isaksson@nordea.com, tel. +46 8 614 8859

Andreas Jonsson, Senior Analyst

andreas.w.jonsson@nordea.com, +46 8 534 910 88

Bengt Roström, Senior Analyst

bengt.rostrom@nordea.com, tel. +46 8 614 8378

Linus Lauri, Assistant Analyst

linus.lauri@nordea.com, tel. +46 8 614 80 03

Siri Pettersson, Assistant Analyst

siti.pettersson@nordea.com, tel. +46 8 614 80 03

Estonia:

Latvia:

Tönu Palm, Chief Analyst

tonu.palm@nordea.com, tel. +372 628 3345

Andris Strazds, Senior Analyst

andris.strazds@nordea.com, tel. +371 67 096 096

Lithuania:

Russia:

Poland:

Zygimantas Mauricas, Analyst

zygimantas.mauricas@nordea.com, +370 5 2657 198

Dmitry A. Savchenko, Analyst

dmitry.savchenko@nordea.ru, +7 495 777 34 77 4194

Dmitry S. Fedenkov, Analyst

dmitry.fedenkov@nordea.ru, +7 495 777 34 77 3368

Piotr Bujak, Chief Economist Poland

piotr.bujak@nordea.com, +48 22 521 36 51

39 ØKONOMISK OVERSIKT │SEPTEMBER 2012 NORDEA MARKETS


■ Economic Research Nordea

Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S.

The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the

current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the

risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient.

The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale

of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient.

Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of

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