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Svensk ekonomi – lågtrycket drar förbi

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  • 1. ■ Innehåll EKONOMISKA UTSIKTER MARS 2012 Ljusglimtar Norrsken ■ Norden är en säker hamn på de finansiella marknaderna. Svensk ekonomi tar fart igen efter en svag start på 2012. Internationell återhämtning ■ En finansiell härdsmälta har undvikits. Utsikterna för den globala ekonomin ljusnar. ÖVERSIKT 04 LJUSGLIMTAR I VÄRLDSEKONOMIN. SVERIGE 08 LÅGTRYCKET DRAR FÖRBI USA 16 EVERY SILVER LINING HAS A CLOUD EURO AREA 18 BACK FROM THE DEAD – BUT PULSE STILL VERY WEAK CHINA 29 EMPHASIS ON STABLE GROWTH OIL 33 OIL PRICES STAY HIGH AS BUFFER REMAINS UNCOMFORTABLY LOW SPECIAL THEME 35 RISKS TO OUR BASELINE SCENARIO2 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 2. ■ InnehållTabellsamling ÖVERSIKT Ljusglimtar i världsekonomin ....................................................................... 04Nyckeltal ................................. 6Räntor och valutor ............... 7 Norden SVERIGE Lågtrycket drar förbi .................................................................................... 08Redaktör NORWAY Better than feared ........................................................................................ 10Annika WinsthChefekonom DENMARKannika.winsth@nordea.com Heading for brighter times ........................................................................... 12Tel +46 8 614 8608 FINLAND No recession – but subdued growth continues ............................................. 14Gått till tryck Större industriländer22 Mars 2012 USA Every silver lining has a cloud ...................................................................... 16 EURO AREA Back from the dead – but pulse still very weak.............................................. 18Besök oss på: UKwww.nordea.se/analys Historically weak recovery will gain a bit more speed .................................... 20 JAPAN Return to a more stable recovery.................................................................. 21Källor:Reuters EcoWin och officiell nat- Övriga länderionell statistik om inget annatanges. POLAND More resilient than expected ........................................................................ 22 RUSSIA Putin is back – inflation will follow ................................................................ 24 ESTONIA Robust export-led growth loses steam ......................................................... 26 LATVIA Moving forward despite strong headwinds ................................................... 27 LITHUANIA No double-dip recession – just a soft landing ............................................... 28 CHINA Emphasis on stable growth .......................................................................... 29 INDIA Slowly regaining momentum ........................................................................ 31 BRAZIL Currency war: vol. 2 ..................................................................................... 32 Råvaror OIL Oil prices stay high as buffer remains uncomfortably low ............................. 33 METALS Metal prices to trend higher as global demand rebounds .............................. 34 SPECIAL THEME Risks to our baseline scenario ..................................................................... 35 OIL RISK SCENARIO Arab spring hits Saudi Arabia/Iran. Chinese bubble bursts ........................... 373 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 3. ■ ÖversiktLjusglimtar i världsekonomin Ökad riskvilja på finansmarknaderna Det mest sannolika scenariot är emellertid fortfarande ”muddling through”, det vill säga att euroområdet hankar Konjunkturellt blir det sämre innan det blir bättre sig fram. De strukturella problemen dämpar tillväxten, Expansiv penningpolitik länge än men det utesluter inte en konjunkturell återhämtning un- der prognosperioden. Under inledningen av 2012 faller emellertid BNP. Nya kapitalkrav på bankerna, vilka skaDen europeiska centralbanken, ECB, har stigit in och ta- vara uppfyllda till sommaren, bidrar till en stram kredit-git en mer aktiv roll. Det har haft stor betydelse för risk- givning. Därefter sker en långsam återhämtning.viljan på finansmarknaderna. I och med ECB:s generösatreårslån till banker, LTRO, bedöms risken för en ny lik- Euron fortsätter att försvagas mot dollarn då förutsätt-viditetskris ha avvärjts åtminstone på kort sikt. Det nega- ningarna för USA är betydligt ljusare. Det gynnar kon-tiva marknadsklimatet före årsskiftet har därmed minskat kurrenskraften och därmed exporten i euroområdet. Enoch riskviljan ökat. svag euro gör emellertid att det höga oljepriset får större negativt genomslag i euroområdet än i USA.Ledande indikatorer har vänt upp i flera delar av världen.Konjunkturellt blir det dock sämre innan det blir bättre. Tyskland agerar fortsatt draglok i Europa. De monetäraStram finanspolitik och dämpad kreditgivning bromsar förhållandena är mycket expansiva och tyska hushållden globala tillväxten. Penningpolitiken förblir däremot väntas bidra till ökad efterfrågan. Svag orderingångmycket expansiv i stora delar av världen under prognos- dämpar dock tillväxten i närtid. I Frankrike står presi-perioden. Under andra halvan av innevarande år ser ut- dentvalet i april i fokus. Den politiska osäkerheten görsikterna något ljusare ut och för 2013 är de ännu något det svårt att veta hur stram finanspolitiken blir framöver.bättre. Totalt i euroområdet räknar vi med att finanspolitiken dämpar tillväxten med 1 procentenhet per år under 2012-Oron kring Iran och ett högt oljepris är en risk som kan 2013.få större genomslag på konjunkturen än vad som ligger ivår prognos. Vidare kan presidentval i viktiga länder som USA tillbaka på spåretUSA och Frankrike skapa osäkerhet. Totalt räknar vi USA har överraskat positivt i många avseenden. Överlagmed en världstillväxt på 2,8 procent i år och med 3,4 har statistiken kommit in bättre än förväntat, delvis påprocent 2013. grund av en mild vinter och stor lagereffekt. Husmark- naden utgör emellertid fortfarande ett orosmoln. UtbudetBNP, procentuell förändring årstakt av bostäder är ännu mycket stort och tar tid att minska. 2010 2011 2012 2013 Omkring 25 procent av hushållen skulle vid en försälj-Världen 4.7 3.2 2.8 3.4USA 3.0 1.7 2.0 2.2 ning idag göra en förlust på sin bostad. Hushållens skul-Euroområdet 1.8 1.5 -0.4 1.0 der dämpar tillväxten flera år framöver även om sparkvo-Japan 4.5 -0.7 2.0 1.5 ten nu ligger på mer uthålliga nivåer. Redan nu synsKina 10.4 9.3 8.0 8.3 också vissa tecken på en svagare utveckling av den pri- vata konsumtionen.Lång väg kvar att vandra för euroområdetLTRO-kapitalet har inte löst problemen i Europa. Här Osäkerheten på den politiska arenan är stor. Risken är atthandlar det snarare om att vinna tid för att kunna ta tag i det får hushållen att hålla hårdare i plånboken. Ju längrede mer långsiktiga strukturella problemen. Det arbetet är det dröjer innan hushållen får besked om förlängda skat-betydligt svårare och kommer att ta många år. telättnader och transfereringar, desto större är risken att hushållen ökar sitt sparande istället för att konsumera.Politiskt är det dessutom fyllt med sprängkraft. Det är en Även för USA räknar vi med att finanspolitiken bromsarbalansgång att strama åt tillräckligt mycket för att få fi- tillväxten med runt 1 procentenhet om året. Det byggernansmarknadernas godkännande och samtidigt ha väljar- dock på att nuvarande finanspolitiska lättnader förlängs.nas stöd. Den utmaningen lär bli tuff på många håll. Inteminst i länder med närliggande val. Hittills har vi sett att Företagen står väl rustade, men efterfrågan är fortsattden ena regeringen efter den andra har bytts ut. Risken dämpad. I år beräknas tillväxten ligga under potentiellför misstroenderöster är betydande när stora grupper av tillväxt på 2-2,5 procent. Federal Reserve, Fed, åter-människor känner sig uppgivna och oroliga inför framti- kommer med ytterligare ett stimulanspaket vid halvårs-den. Det går inte att utesluta att populistiska partier får skiftet när tillväxten visar sig svagare än vad Fed räknarökat stöd. Det kan i sin tur påverka riskviljan hos mark- med idag. Om den politiska kartan ritas om byts Fedche-nadsaktörerna negativt. Risken är att strukturella och fen Ben Bernanke med stor sannolikhet ut. Troligtvis tillåtstramande åtgärder inte vidtas i tillräcklig omfattning. en mer hökaktig centralbankschef. Övriga ledamöter sit-Dämpad riskaptit får snabbt effekter på den reala ekono-min.4 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 4. ■ Översiktter dock kvar och bör hålla emot ett alltför stort skifte av ljusare tider. Efterfrågan drivs framför allt av privat kon-penningpolitiken. sumtion och av offentliga investeringar. Hushållens dis- ponibla inkomster har utvecklades starkt på grund avArbetsmarknaden med svag sysselsättning och hög ar- låga räntor och skattelättnader. Hushållen har hittills ökatbetslöshet oroar Fed. Penningpolitiken är emellertid ex- sitt sparande, vilket skapar gynnsamma förutsättningartremt expansiv. När inflationsrisken blir allt mer påtaglig för en god konsumtion. Nästa år väntas exporten bidrabyter centralbanken fokus. Fed inleder räntehöjningarna mer och ekonomin växer då på bred front. Norge klararunder andra halvan av 2013 och då höjer Fed snabbare än den globala avmattningen väl. God inhemsk efterfråganvad som är prissatt på marknaden idag. väger upp en mer dämpad export. Ett högt sparande, sti- gande sysselsättning och låga räntor talar för att den pri-Asien och tillväxtländerna vata konsumtionen bidrar starkt till efterfrågan i år. Nor-Japan lider av en stark valuta. Samtidigt pågår återupp- ges bank låter styrräntan ligga still i år för att inleda rän-byggnaden efter tsunamin. Det gör att tillväxten, trots en tehöjningscykeln under 2013. Risken för en apprecieringstark yen, ökar med 2,0 procent i år och 1,5 procent un- av norska kronan är då mindre. Finland undviker recess-der nästkommande år. Det är klart över den potentiella ion med en hårsmån. BNP väntas bottna i samklang medtillväxten som ligger runt 1,0 procent i årstakt. euroområdet. Exporten föll tillbaka kraftigt i slutet av förra året och förväntas bli svag fram till andra halvåret iBRIC-länderna fortsätter att vara en viktig motor för res- år. Den privata konsumtionen överraskade dock positivt iten av världen. Även i dessa länder blir dock tillväxten fjol på grund av en stark löneutveckling och ett minskatnågot mer dämpad under prognosperioden. Kina satte ny- sparande. I år väntas konsumtionen bidra mindre till till-ligen upp ett tillväxtmål på 7,5 procent. Det ska dock växten då sparandet inte kan fortsätta att minska.snarare ses som ett tillväxtgolv. Vi räknar med att eko-nomin växer med 8,0 – 8,5 procent både 2012 och 2013. BNP, procentuell förändring årstakt 2010 2011 2012 2013I mångt och mycket är tillväxten en politisk fråga - det Danmark 1,3 1,1 1,2 1,7finns möjlighet att stimulera både via finans- och pen- Finland 3,7 2,9 0,5 2,0ningpolitik. Ambitionen är fortsatt att nå en mer kon- Norge, fastlandet 1,9 2,6 2,6 3,0 Sverige 6,1 3,9 -0,3 1,8sumtionsdriven ekonomi och därmed bli mindre bero-ende av investeringar och export. Det går dock trögt ochvi räknar inte med någon större förändring i år. Tydlig avmattning av svensk tillväxt Svensk ekonomi bromsar in markant. Höstens börsned-Indien bromsade in mer än väntat under förra året. Men gång och minskad riskaptit hos både företag och hushållutvecklingen av industriproduktionen tyder nu på en syns nu i BNP-data. Under fjärde kvartalet föll BNP jäm-återhämtning. Än mer dämpades tillväxten i Brasilien i fört med tredje kvartalet och även under första kvartalet ifjol. Den kraftiga apprecieringen av valutan är ett viktigt år beräknas BNP komma in svagt. Men ledande indikato-skäl till den svaga utvecklingen. Lägre tillväxt har fått rer för svensk ekonomi tycks ha bottnat och under andracentralbanken att byta fot och inleda räntesänkningscy- halvåret väntas en viss återhämtning ske.keln. Vi räknar med ytterligare en eller två sänkningar inärtid. Rysk ekonomi drivs för tillfället av hushållen. En Arbetsmarknaden släpar dock efter och arbetslöshetengynnsam utveckling av löneökningar samt måttlig inflat- väntas stiga under året. Det gör att Riksbanken sänkerion gör att privat konsumtion är en central motor. Inve- räntan ytterligare i år. Svag tillväxt, låg inflation och sti-steringarna ökar snabbare igen, men stram kreditgivning gande arbetslöshet motiverar fortsatta räntesänkningar.och högre räntor håller emot framöver. Historiskt har arbetslösheten haft ett stort genomslag på penningpolitiken och det ligger i prognosen även dennaHögt oljepris ett orosmoment gång. Återhämtning under senare delen av 2012 gör attOljepriset har stigit i takt med att oron kring Iran har es- Riksbanken inleder räntehöjningarna tidigare än förvän-kalerat. Utbudssidan oroar. Riskerna i regionen har lett tat under 2013 och höjer räntan mer än vad marknadentill att det är svårt att försäkra oljefartygen i området prissätter.samt till en ökad lageruppbyggnad. OPEC:s lagerreserverväntas falla under önskvärd nivå. Samtidigt byter Japan Trots en dämpad tillväxt de närmaste kvartalen förblir fi-ut kärnkraft mot olja. Ökar spänningen ytterligare i Iran nanspolitiken endast svagt expansiv. Kommunsektornkan priset snabbt stiga till 200 dollar per fat. Det är dock och arbetsmarknaden är i fokus och i prognosen liggerinte vårt huvudscenario. Vi räknar med att oljepriset lig- extra stimulans på 15 miljarder kronor till dessa områ-ger på 127 dollar per fat i slutet av året och att det sedan den. Kronan har hållit emot turbulensen bra. Svag kon-stiger till 130 dollar per fat i slutet av 2013. junktur och Riksbankens räntesänkningar gör dock att kronan försvagas till 9,15 kronor mot euron i slutet avNorden innevarande år.De nordiska länderna är små öppna ekonomier som på-verkades av den globala avmattningen i fjol. Utsikterna Annika Winsth annika.winsth@nordea.com +46 8 614 8608framöver är dock förhållandevis goda. Danmark går mot5 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 5. ■ ÖversiktGrowth, % Inflation, % 2009 2010 2011 2012E 2013E 2009 2010 2011 2012E 2013EWorld1) -1.0 4.7 3.2 2.8 3.4 World1) 0.8 2.6 3.9 2.8 2.6USA -3.5 3.0 1.7 2.0 2.2 USA -0.3 1.6 3.1 2.5 1.9Euro area -4.2 1.8 1.5 -0.4 1.0 Euro area 0.3 1.6 2.7 2.3 1.8China 9.2 10.4 9.3 8.0 8.3 China -0.7 3.3 5.4 3.8 4.2Japan -5.5 4.5 -0.7 2.0 1.5 Japan -1.3 -0.7 -0.3 -0.4 -0.2Denmark -5.8 1.3 1.1 1.2 1.7 Denmark 1.3 2.3 2.8 2.4 1.7Norw ay -1.6 1.9 2.6 2.6 3.0 Norw ay 2.1 2.5 1.2 1.0 1.8Sw eden -5.0 6.1 3.9 -0.3 1.8 Sw eden -0.5 1.2 3.0 1.1 1.6UK -4.4 2.1 0.9 0.8 1.8 UK 2.2 3.3 4.5 2.5 2.0Sw itzerland -1.9 2.7 1.8 0.4 1.2 Sw itzerland -0.5 0.7 0.2 -0.5 0.3Germany -5.1 3.7 3.1 0.6 1.8 Germany 0.2 1.2 2.5 2.1 1.7France -2.7 1.5 1.7 0.0 1.2 France 0.1 1.7 2.3 2.2 1.8Italy -5.1 1.5 0.4 -1.6 0.1 Italy 0.8 1.6 2.9 3.0 2.4Spain -3.7 -0.1 0.7 -1.3 0.5 Spain -0.2 2.0 3.1 1.9 1.5Netherlands -3.5 1.7 1.2 -0.3 1.5 Netherlands 1.0 0.9 2.5 2.2 1.7Austria -3.8 2.3 3.1 0.3 1.7 Austria 0.4 1.7 3.6 2.4 1.8Portugal -2.9 1.4 -1.5 -3.5 -0.5 Portugal -0.9 1.4 3.6 2.6 1.2Greece -3.2 -3.5 -7.0 -5.5 -1.0 Greece 1.3 4.7 3.2 2.4 1.5Finland -8.4 3.7 2.9 0.5 2.0 Finland 0.0 1.2 3.4 3.0 2.5Ireland -7.0 -0.4 0.6 0.5 2.5 Ireland -1.7 -1.6 1.2 1.0 0.8Estonia -13.9 2.3 7.6 2.0 4.2 Estonia -0.1 3.0 5.0 3.5 3.7Poland 1.6 3.9 4.3 3.1 3.2 Poland 3.5 2.6 4.3 3.8 2.7Russia -7.8 4.0 4.4 4.3 5.0 Russia 11.7 6.9 8.5 6.3 7.0Latvia -17.7 -0.3 5.5 2.0 5.0 Latvia 3.6 -1.0 4.4 3.0 3.2Lithuania -14.8 1.4 5.9 2.7 4.0 Lithuania 4.2 1.3 4.1 3.4 3.8Czech Republic -4.0 2.2 2.3 2.0 2.9 Czech Republic 1.0 1.5 2.1 1.7 2.2Hungary -6.7 1.2 1.4 0.0 1.7 Hungary 4.2 4.9 4.0 4.8 3.0Kazakhstan 1.2 7.0 6.8 6.3 7.0 Kazakhstan 7.3 7.8 8.2 7.5 8.0Romania -7.1 -1.3 2.3 3.1 3.8 Romania 5.6 6.1 5.8 4.0 3.6Turkey -4.8 8.9 6.7 3.0 4.5 Turkey 6.3 8.6 6.0 6.7 5.9South Africa -1.7 2.8 3.1 3.3 4.0 South Africa 7.2 4.3 5.0 6.3 5.8India 8.2 9.6 6.8 6.7 7.8 India 2.4 9.6 9.5 5.5 5.0Brazil -0.7 7.6 2.8 3.5 4.5 Brazil 4.9 5.0 6.4 5.6 5.4Mexico -6.3 5.4 3.9 3.4 3.6 Mexico 5.3 4.2 3.8 3.6 3.3Public finances, % of GDP Current account, % of GDP 2009 2010 2011 2012E 2013E 2009 2010 2011 2012E 2013EUSA -10.1 -8.9 -8.6 -7.6 -5.5 USA -2.7 -3.2 -3.1 -3.0 -3.5Euro area -6.3 -6.2 -4.1 -3.3 -2.7 Euro area -0.3 -0.5 -0.3 -0.3 -0.2China -2.3 -1.6 -2.2 -1.9 -2.0 China 5.2 5.1 2.7 3.0 2.5Japan -8.5 -8.5 -10.1 -10.0 -9.0 Japan 2.8 3.6 2.1 2.0 2.5Denmark -2.8 -2.7 -2.3 -4.6 -2.2 Denmark 3.3 5.5 6.5 5.1 5.1Norw ay 10.6 10.5 15.1 16.8 17.5 Norw ay 10.8 12.4 14.6 16.5 16.9Sw eden -1.0 -0.1 0.2 -0.9 -0.8 Sw eden 6.8 6.8 7.2 7.0 7.5UK -11.3 -10.1 -8.2 -7.2 -5.6 UK -1.7 -3.3 -2.8 -1.7 -1.5Sw itzerland 2.0 0.7 0.8 0.2 0.4 Sw itzerland 7.4 14.0 14.1 10.5 11.0Germany -3.2 -4.3 -1.0 -1.0 -0.8 Germany 5.8 5.8 5.1 4.8 4.4France -7.5 -7.1 -5.5 -4.8 -3.3 France -2.1 -2.2 -2.7 -2.8 -2.7Italy -5.4 -4.6 -3.9 -2.1 -0.7 Italy -2.0 -3.5 -3.8 -2.0 -1.0Finland -2.5 -2.6 -0.5 -0.2 0.1 Finland 2.0 1.4 -0.4 -0.6 -0.2Estonia -1.7 0.1 0.8 -2.8 -0.5 Estonia 4.5 2.8 3.2 -0.2 -0.8Poland -7.3 -7.9 -5.4 -3.2 -2.8 Poland -3.9 -4.7 -4.1 -3.8 -3.5Russia -5.9 -4.0 0.5 0.7 1.0 Russia 4.0 4.8 4.5 3.8 3.3Latvia -9.7 -7.7 -5.5 -2.5 -2.0 Latvia 8.6 3.0 -1.2 -1.0 -1.5Lithuania -9.5 -7.1 -4.9 -2.7 -2.4 Lithuania 2.6 1.3 -1.4 -2.3 -2.5Czech Republic -5.9 -4.7 -4.4 -3.5 -3.0 Czech Republic -3.2 -3.8 -3.5 -3.5 -4.0Hungary -4.5 -4.2 -3.0 -2.8 -2.5 Hungary 0.4 2.4 2.2 3.0 1.5Kazakhstan -3.0 -4.1 2.1 2.3 3.0 Kazakhstan 4.9 4.0 7.2 6.5 6.0Romania -8.5 -6.4 -4.4 -3.5 -3.0 Romania -4.3 -4.0 -4.5 -4.8 -5.0Turkey -5.5 -3.6 -1.7 -2.1 -1.8 Turkey -2.3 -6.5 -10.0 -7.5 -6.5South Africa -5.8 -5.3 -5.6 -5.2 -4.7 South Africa -4.0 -2.7 -3.9 -4.4 -5.3India -6.4 -4.8 -6.0 -5.5 -4.8 India -1.9 -3.1 -3.0 -2.5 -3.2Brazil -3.2 -2.7 -2.4 -2.0 -1.8 Brazil -1.5 -2.3 -2.6 -2.5 -2.3Mexico -2.3 -2.9 -2.2 -1.8 0.5 Mexico -0.7 -0.5 -0.7 -0.9 -1.51) Weight ed average of countries in t his t able. Accounts for 76.5%of world GDP. Weights calculated using PPP adjust ed GDP levels f or 2008 according to the IM Fs World Economic Outlook6 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 6. ■ ÖversiktMonetary policy rates Monetary policy rate spreads vs Euro area 22.3.12 3M 31.12.12 30.06.13 31.12.13 22.3.12 3M 31.12.12 30.06.13 31.12.13US 0,25 0,25 0,25 0,25 1,00 US -0,75 -0,75 -0,75 -0,75 0,00Japan 0,10 0,10 0,10 0,10 0,10 Japan1 -0,15 -0,15 -0,15 -0,15 -0,90Euro area 1,00 1,00 1,00 1,00 1,00 Euro area - - - - -Denmark 0,70 0,60 0,70 0,70 0,80 Denmark -0,30 -0,40 -0,30 -0,30 -0,20Sw eden 1,50 1,25 0,75 1,00 1,75 Sw eden 0,50 0,25 -0,25 0,00 0,75Norw ay 1,50 1,50 1,50 2,00 2,50 Norw ay 0,50 0,50 0,50 1,00 1,50UK 0,50 0,50 0,50 0,50 1,00 UK -0,50 -0,50 -0,50 -0,50 0,00Sw itzerland 0,25 0,25 0,25 0,25 1,00 Sw itzerland -0,75 -0,75 -0,75 -0,75 0,00Poland 4,50 4,50 4,00 4,00 4,50 Poland 3,50 3,50 3,00 3,00 3,50Czech Rep. 0,75 0,75 0,75 0,75 1,50 Czech Rep. -0,25 -0,25 -0,25 -0,25 0,50Hungary 6,00 6,00 5,50 5,50 5,50 Hungary 5,00 5,00 4,50 4,50 4,50Romania 5,50 5,75 5,50 5,50 5,50 Romania 4,50 4,75 4,50 4,50 4,50Turkey 5,75 5,75 5,75 5,75 6,75 Turkey 4,75 4,75 4,75 4,75 5,75Russia 8,00 8,00 8,00 8,00 8,75 Russia 7,00 7,00 7,00 7,00 7,95Kazakhstan 7,50 7,50 8,00 8,00 8,50 Kazakhstan 6,50 6,50 7,00 7,00 6,75South Africa 5,50 5,50 5,50 6,00 7,00 South Africa 4,50 4,50 4,50 5,00 4,50China 6,56 6,56 6,56 6,56 6,56 China 5,56 5,56 5,56 5,56 5,56India 8,50 8,00 7,00 7,50 8,00 India 7,50 7,00 6,00 6,50 7,00Brazil 9,75 9,25 9,25 9,25 11,00 Brazil 8,75 8,25 8,25 8,25 10,00Mexico 4,50 4,50 4,50 4,50 5,50 Mexico 3,50 3,50 3,50 3,50 4,703-month rates 3-month spreads vs Euro area 22.3.12 3M 31.12.12 30.06.13 31.12.13 22.3.12 3M 31.12.12 30.06.13 31.12.13US 0,47 0,45 0,50 0,70 1,50 US -0,35 -0,40 -0,30 -0,15 0,50Euro area 0,82 0,85 0,80 0,85 1,00 Euro area - - - - -Denmark 0,99 0,90 0,90 0,95 1,10 Denmark 0,16 0,05 0,10 0,10 0,10Sw eden 2,30 1,85 1,45 2,00 2,40 Sw eden 1,47 1,00 0,65 1,15 1,40Norw ay 2,32 2,23 2,03 2,55 2,93 Norw ay 1,50 1,38 1,23 1,70 1,93UK 1,04 1,05 0,90 1,00 1,50 UK 0,21 0,20 0,10 0,15 0,50Poland 4,95 4,90 4,45 4,35 4,75 Poland 4,13 4,05 3,65 3,50 3,75Czech Republic 1,23 1,15 1,10 1,05 1,75 Czech Republic 0,41 0,30 0,30 0,20 0,75Hungary 7,26 8,30 8,15 7,30 6,40 Hungary 6,44 7,45 7,35 6,45 5,40Russia 6,75 6,80 7,00 7,50 8,00 Russia 5,93 5,95 6,20 6,65 7,00Latvia 1,16 1,20 1,15 1,40 1,90 Latvia 0,34 0,35 0,35 0,55 0,90Lithuania 1,25 1,28 1,25 1,50 2,00 Lithuania 0,43 0,43 0,45 0,65 1,0010-year government benchmark yields 10-year yield spreads vs Euro area 22.3.12 3M 31.12.12 30.06.13 31.12.13 22.3.12 3M 31.12.12 30.06.13 31.12.13US 2,37 2,05 2,35 2,80 3,90 US 0,33 0,20 0,15 0,25 0,85Euro area 2,04 1,85 2,20 2,55 3,05 Euro area - - - - -Denmark 2,05 1,80 2,20 2,55 3,05 Denmark 0,01 -0,05 0,00 0,00 0,00Sw eden 2,12 2,10 2,30 2,75 3,45 Sw eden 0,08 0,25 0,10 0,20 0,40Norw ay 2,60 2,28 2,54 3,04 3,44 Norw ay 0,55 0,43 0,34 0,49 0,39UK 2,41 2,20 2,80 3,20 3,80 UK 0,37 0,35 0,60 0,65 0,75Poland 5,50 5,40 5,45 5,50 5,60 Poland 3,46 3,55 3,25 2,95 2,55Czech Rep. 3,56 3,20 3,50 3,60 4,25 Czech Rep. 1,52 1,35 1,30 1,05 1,20Hungary 8,69 10,00 9,50 9,00 8,00 Hungary 6,65 8,15 7,30 6,45 4,95Exchange rates vs SEK Exchange rates vs EUR and USD 22.3.12 3M 31.12.12 30.06.13 31.12.13 22.3.12 3M 31.12.12 30.06.13 31.12.13EUR/SEK 8,90 8,95 9,15 9,05 8,80 EUR/USD 1,32 1,25 1,15 1,10 1,00USD/SEK 6,73 7,16 7,96 8,23 8,80 EUR/JPY 1) 111 103 98 94 95JPY/SEK1) 8,00 8,73 9,36 9,68 9,26 EUR/GBP 0,83 0,84 0,80 0,78 0,75DKK/SEK 1,20 1,20 1,23 1,22 1,18 EUR/CHF 1,21 1,20 1,25 1,25 1,30NOK/SEK 1,17 1,18 1,20 1,19 1,16 EUR/SEK 8,90 8,95 9,15 9,05 8,80GBP/SEK 10,67 10,65 11,44 11,60 11,73 EUR/NOK 7,61 7,60 7,60 7,60 7,60CHF/SEK 7,38 7,46 7,32 7,24 6,77 EUR/PLN 4,15 4,10 4,00 3,92 3,80PLN/SEK 2,14 2,18 2,29 2,31 2,32 EUR/RON 4,37 4,30 4,25 4,15 4,00CZK/SEK 0,36 0,36 0,37 0,37 0,37 USD/JPY 84,0 82,0 85,0 85,0 95,0HUF/SEK 0,03 0,03 0,03 0,03 0,03 GBP/USD 1,59 1,49 1,44 1,41 1,33RUB/SEK 0,23 0,25 0,29 0,30 0,31 USD/TRY 1,82 1,70 1,62 1,40 1,36TRY/SEK 3,71 4,21 4,90 5,88 6,47 USD/CHF 0,91 0,96 1,09 1,14 1,30LVL/SEK 12,78 12,79 13,03 12,89 12,48 USD/SEK 6,73 7,16 7,96 8,23 8,80LTL/SEK 2,58 2,59 2,65 2,62 2,55 USD/NOK 5,75 6,08 6,61 6,91 7,60CNY/SEK 1,06 1,14 1,30 1,37 1,48 USD/PLN 3,14 3,3 3,5 3,6 3,8INR/SEK 0,13 0,15 0,16 0,17 0,19 USD/CNY 6,32 6,30 6,13 6,00 5,95BRL/SEK 3,69 3,87 4,55 4,84 5,18 USD/INR 50,6 49,2 48,5 48,0 47,0KZT/SEK 0,05 0,05 0,05 0,06 0,06 USD/BRL 1,82 1,85 1,75 1,70 1,70RON/SEK 2,03 2,08 2,15 2,18 2,20 USD/KZT 148 148 147 145 145MXN/SEK 0,53 0,55 0,64 0,70 0,70 USD/MXN 12,7 13,0 12,5 11,8 12,5ZAR/SEK 0,88 0,93 1,08 1,13 1,14 USD/ZAR 7,64 7,70 7,40 7,30 7,701) Pr. 100 enheter7 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 7. ■ SverigeLågtrycket drar förbi Svag konjunktur på kort sikt… Nytt regelverk för den finansiella sektorn kan också hämma kreditgivningen. På hemmaplan väntas finanspo- …men förbättring i sikte litiken inte heller framöver ha någon större påverkan på Riksbanken fortsätter att sänka räntan i år tillväxten. Statsskulden är låg, men vi räknar med att det offentliga finansiella sparandet visar underskott på ca 1 Kronan försvagas något procent av BNP redan i år. En politisk motvilja att öka statsskulden och anslutningen till EU:s finanspakt, somDen starka uppgången i den svenska ekonomin bröts i är stramare än Sveriges nuvarande ramverk, talar för attslutet av 2011. Exporten föll kraftigt, investeringarna finanspolitiken fortsätter att vara förhållandevis restrik-planade ut och försiktiga hushåll ökade sitt sparande. tiv. Försvagningen av konjunkturen gör dock att den blirMycket tyder på att BNP utvecklades svagt även under svagt expansiv nästa år med reformer på ca 15 miljarderinledningen av året och allt mer talar för att BNP stagne- kronor, motsvarande 0,4 procent av BNP. Sannolikt till-rar för helåret 2012. Avmattningen minskar efterfrågan delas kommunerna mer resurser 2013. Likaså torde depå arbetskraft. Sysselsättningen har vänt ned och arbets- arbetsmarknadspolitiska åtgärderna utökas i spåren av enlösheten stiger till över 8 procent i slutet av 2012. Inflat- stigande arbetslöshet.ionstrycket är måttligt och lär minska ytterligare i taktmed att resursutnyttjandet sjunker. Hushållen lättar på plånboken igen Hushållens skulder har fortsatt att öka de senaste åren.Vi räknar med att Riksbanken fortsätter att sänka räntan Den höga kredittillväxten återspeglas i att hushållensför att mildra nedgången i konjunkturen. Räntesänkning- egna finansiella sparande har varit lågt under en längrearna bidrar till att hjulen i ekonomin börjar snurra snabb- period. Det har blivit än tydligare efter revideringarna avbare igen. Minskad osäkerhet om den ekonomiska ut- nationalräkenskaperna. Det egna finansiella sparandet harvecklingen och börsåterhämtningen stöttar också tillväx- i genomsnitt varit minus 2,5 procent av disponibel in-ten. Exporten utvecklas svagt på kort sikt, men senare i år komst de senaste 10 åren. Sparandet har förvisso ökatbidrar en bättre global efterfrågan till att lyfta exporten. något de senaste kvartalen, men nådde i slutet av 2011Sammantaget växer ekonomin igen från och med mitten bara upp till balans.av 2012 för att sedan uppvisa hyggliga tillväxttal 2013.Med viss eftersläpning påverkas även arbetsmarknaden Den ökade skuldsättningen och det låga sparandet hardär läget förbättras något under loppet av nästa år. ökat hushållens räntekänslighet, vilket utgör en risk för tillväxten i ett medelfristigt perspektiv. På kort sikt bidrarRestriktiv finanspolitik dock lägre bolåneräntor till att förbättra hushållens eko-Flera faktorer dämpar återhämtningen. I vår omvärld nomi. Tillsammans med återhämtningen på börsen ochtyngs den ekonomiska aktiviteten av finanspolitisk kon- vad som ser ut att vara en stabilisering av huspriserna ef-solidering och fortsatt osäkerhet om skuldproblematiken. ter avkylningen i höstas väntas hushållens konsumtions-Sverige: Makroekonomiska nyckeltal (årlig tillväxt i procent om inget annat anges) 2008 (SEKbn) 2009 2010 2011 2012E 2013EPrivat konsumtion 1,505 -0.3 3.7 2.1 0.5 1.8Offentlig konsumtion 835 2.2 1.9 1.8 0.4 0.5Fasta bruttoinvesteringar 642 -15.5 7.7 5.8 -2.7 1.0 - industri 96 -26.3 1.0 10.1 -2.8 3.4 - bostadsinvesteringar 112 -19.1 17.2 12.8 -8.2 -2.1Lagerinvesteringar* 6 -1.6 2.1 0.7 -0.6 -0.3Export 1,715 -13.8 11.7 6.8 -1.6 4.8Import 1,499 -14.3 12.7 6.1 -2.7 3.4BNP -5.0 6.1 3.9 -0.3 1.8BNP, kalenderkorrigerad -4.9 5.9 4.0 0.0 1.8Nominell BNP (mdr SEK) 3,204 3,106 3,331 3,495 3,525 3,649Arbetslöshet (% av arbetskraften) 8.3 8.4 7.5 7.9 8.1Sysselsättning -2.1 1.0 2.1 -0.5 0.0Konsumentpriser (årsgenomsnitt KPI) -0.5 1.2 3.0 1.1 1.6Underliggande inflation (årsgenomsnitt KPIF) 1.7 2.0 1.4 1.2 1.6Timlöner (nationalräkenskaper) 3.0 0.3 2.6 3.5 3.3Bytesbalans (mdr SEK) 212 225 250 248 274- % av BNP 6.8 6.8 7.2 7.0 7.5Handelsbalans (% av BNP) 3.1 2.6 2.7 2.9 3.4Offentligt finansiellt sparande (mdr SEK) -30 -2 8 -32 -30- % av BNP -1.0 -0.1 0.2 -0.9 -0.8Offentlig bruttoskuld, % av BNP 42.5 39.8 36.2 36.9 32.1* Bidrag till BNP-utvecklingen, procentenheter8 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 8. ■ Sverigevilja öka igen. De reala inkomsterna stiger med i genom- Exporten svag i närtidsnitt närmare 2 procent per år under åren 2012 och 2013.Sammantaget bedöms hushållens konsumtion öka framö-ver, trots att arbetsmarknaden försämras i år.Måttlig inflation öppnar för räntesänkningarSvensk ekonomi hade förra året återhämtat sig efter denkraftiga nedgången 2008 och 2009. Det avspeglas också iavtalsrörelsen, som förefaller landa på löneökningar ilinje med det historiska genomsnittet och betydligt högreän de föregående avtalen. Den övergripande bilden är attdet inhemska inflationstrycket är måttligt och att det lärdämpas ytterligare i takt med att resursutnyttjandet sjun-ker. Samtidigt är den importerade inflationen mycket låg,vilket är en starkt bidragande orsak till den i dagsläget Hushållens egna finansiella sparande lågtlåga inflationen. Eftersom vi räknar med att kronankommer att försvagas stiger inflationen något. Upp-gången är dock inte starkare än att inflationen förblir un-der Riksbankens 2-procentsmål även nästa år.Utsikterna för en dämpad inflation bidrar till att Riks-banken sänker räntan ytterligare i år. Riksbanken väntasåtergå till en höjningscykel 2013 då resursutnyttjandetåter stiger. Osäkerheten om hushållens skuldsättning lärknappast hindra Riksbanken från att sänka räntan i närtid.Däremot kommer skuldsättningen sannolikt att vara ettargument för förhållandevis tidiga räntehöjningar i sam-band med att arbetsmarknaden repar sig nästa år.Kronan försvagas från stark position Sysselsättningen faller i årKronan klarade höstens och vinterns turbulens på de fi-nansiella marknaderna väl. Utvecklingen illustrerar ettparadigmskifte med en ökad stabilitet för kronan. Det ta-lar för en förhållandevis stark krona även framöver. Viräknar dock med att en viss försvagning kommer att skemot såväl euron som dollarn. Orsakerna är framför allt attden svenska konjunkturen bromsar in och Riksbankensräntesänkningar, vilket minskar ränteskillnaderna motomvärlden.Risker åt båda hållRisken för en svagare utveckling av den svenska ekono-min är framför allt förknippad med skuldkrisen i euroom-rådet. Läget har stabiliserats men sårbarheten är fortsattpåtaglig. Det finns även möjlighet för en starkare svensk Måttligt inflationstrycktillväxt. De ljusglimtar som syns i den globala ekonomin,och då inte minst på andra sidan Atlanten, kan resultera iatt efterfrågan i omvärlden stiger snabbare än väntat.Dessutom har flera tillväxtländer ökat i betydelse somavsättningsmarknader för svenska företag, vilket även detskulle kunna bidra till en högre export och därmed enstarkare BNP-tillväxt.Torbjörn Isakssontorbjorn.isaksson@nordea.com +46 614 88599 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 9. ■ NorwayBetter than feared Rising optimism and growing demand in 2013. Unemployment slightly down; sustained low inflation As a result of the rising bank funding costs, new regula- Rate hike not on the cards until 2013 tions for the banking sector as well as increased macroe- conomic uncertainties, banks have raised their margins NOK still strong on corporate loans and tightened their credit standards. However, Norges Bank’s rate cuts and the lower moneyIn December 2011 we revised down our projections for market rates help to dampen the pick-up in interest ratesthe Norwegian economy quite sharply due to the Euro- charged by the banks. Current indicators suggest thatarea sovereign debt crisis. We have now revised down mainland investment growth will hold up well, and theour growth forecast for exports from mainland Norway benign growth outlook for the Norwegian economy alsofurther. Still, the outlook for the domestic economy has supports a pick-up in investment activity. In the housingimproved, and we have revised up our projection for do- market, we expect residential investment to continue tomestic demand quite sharply. All in all, we see stronger rise after the marked uptrend in house prices in 2011.growth now in the mainland economy than we did in De- Meanwhile, the rate of increase in house prices shouldcember. The indirect effects of the Euro-area crisis ap- slow down somewhat this year.pear to be less dramatic than feared in December. The fi-nancial markets have calmed down and as a result, the Oil investment looks set to pick up by even more than werisk of a major setback has declined. Consumers and expected in December. Capacity problems will probablybusinesses seem to be less affected by the turmoil than be the key determinant of how high the actual growthwe believed three months ago. rate ends up being. We now also see higher growth in oil investment in 2013 than we did in December.Consumers more bullish in 2012A high savings ratio, fairly strong employment growth, Weak exportslow interest rates and prospects of solid real wage growth Exports of goods from the mainland economy look set topoint to robust consumption growth in 2012. Last year show a weaker trend than we expected before Christmas.consumer spending growth was surprisingly weak, prob- But the much better outlook for exports of services willably due to significant uncertainty about the economic limit the decline in mainland exports. Meanwhile, withsituation. However, in January the consumption of goods solid growth in domestic demand import growth will out-rose sharply. We are aware of the risk involved in draw- strip export growth by a wide margin. Still, on the backing conclusions on the basis of one set of monthly data, of the markedly higher oil prices the scene is set for abut the pick-up in January could be an indication that significant increase in the current account surplus.consumption growth is on the increase. Also the confi-dence indicators reflect growing optimism. We have Slightly tighter labour markettherefore sharply revised up our forecast for consumption With robust domestic demand growth total output inthis year and maintain our projection of solid growth also Norway will also grow quite considerably. And asNorway: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (NOK bn) 2009 2010 2011 2012E 2013EPrivate consumption 1,028 0.0 3.7 2.2 3.0 3.0Government consumption 488 4.3 1.7 1.5 2.0 2.5Fixed investment 542 -7.5 -5.2 6.9 7.7 5.3 - gross investment, mainland 396 -13.2 -2.5 8.2 3.9 4.2 - gross investment, oil 132 2.9 -14.3 10.6 20.0 8.0Stockbuilding* 85 -2.2 1.9 0.0 0.0 0.0Exports 1,197 -4.2 1.8 -1.1 0.1 1.4 - crude oil and natural gas 620 -2.0 -4.8 -4.4 0.0 0.0 - other goods 323 -8.0 2.5 -0.6 -1.5 3.0Imports 755 -12.5 9.9 2.5 4.5 3.9GDP 2,560 -1.7 0.7 1.6 2.2 2.4GDP, mainland 1,863 -1.6 1.9 2.6 2.6 3.0Unemployment rate, % 3.2 3.6 3.3 3.1 3.1Consumer prices, % y/y 2.1 2.5 1.2 1.0 1.8Core inflation, % y/y 2.6 1.4 0.9 1.3 1.6Annual w ages (incl. pension costs), % y/y 4.2 3.6 4.3 3.7 4.0Current account (NOKbn) 254.5 313.6 395.9 489.3 536.5- % of GDP 10.8 12.4 14.6 16.5 16.9Trade balance, % of GDP 11.4 12.4 13.9 16.1 16.6General govt budget balance (NOKbn) 249.6 265.7 410.0 500.0 556.0- % of GDP 10.6 10.5 15.1 16.8 17.5* Contribution to GDP growth (% points)10 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 10. ■ Norwayproductivity growth is currently relatively weak, we see Strong consumption in Januaryemployment rising sharply this year. The supply of la-bour will also pick up markedly, but not enough to pre-vent unemployment from cautiously edging lower. In2013 we expect stronger productivity growth to put adamper on employment growth. But as labour supplygrowth is also expected to slow, the unemployment rateshould remain largely unchanged.Moderate wage growth and low inflationThis year’s centralised pay talks will most likely result inmoderate pay rises, but against the backdrop of a slightlytighter labour market pay rises agreed locally could ex-ceed the level we envisaged in December. However, dueto sustained NOK strength inflation will remain subdued, Sustained low inflationand we do not see inflation rising until 2013. By thattime the effect of the NOK appreciation will fade andstrong consumer spending growth will likely pave theway for higher margins.Cautious rate hike in 2013With low inflation, moderate wage growth, low interestrates internationally and sustained weak growth for Nor-way’s trading partners, Norges Bank looks set to keep itspolicy rate unchanged this year. Money market rates maystill move slightly down driven by narrower spreads be-tween Norges Bank’s policy rate and money marketrates. In 2013 we expect growth internationally to pickup somewhat. In this environment expectations for inter-est rates will rise and it will become easier for Norges Oil investment risingBank to hike its policy rate without risking further NOKappreciation. Consequently, we expect Norges Bank tocautiously hike rates in 2013.NOK still strongBased on expectations of wider interest rate spreads ver-sus other countries, rising oil prices and growing risk ap-petite the NOK strengthened markedly over the first twoto three months of this year. This was one of the key fac-tors prompting Norges Bank to sanction a surprise ratecut at its meeting in March, a cut that contributed toweakening the NOK somewhat. In our view, EUR/NOKwill continue to trade at fairly strong levels in the yearsahead, but any appreciation beyond current levels willlikely only be for short periods. The pick-up in oil prices Interest rate spreads a key NOK driverwill gradually lose momentum, and Norges Bank willkeep its policy rate at the current levels for about a year.The expected rate hike in 2013 may temporarily causethe NOK to strengthen, but at that time expectations ofhigher interest rates abroad will also have risen. In theevent of strong appreciation of the NOK, Norges Bankhas clearly demonstrated its willingness to respond bycutting rates further. So any sharp strengthening of theNOK will at the very least postpone the expected ratehike in 2013.Erik Bruceerik.bruce@nordea.com +47 2248 444911 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 11. ■ DenmarkHeading for brighter times Prospect of accelerating growth towards end-2013 again. That potential is further underpinned by the re- lease of early retirement contributions; we estimate this Unemployment has peaked alone to potentially lift consumer spending by about 1% Slowing exports point this year. Housing market the main threat to the economy Surprisingly positive labour market trends Unemployment has fallen steadily over the past fiveThe Danish economy is heading for brighter times. months, and Q4 saw a marginal increase in overall em-Unemployment is declining, consumers are sensing the ployment. Labour market trends have thus been muchdawn of better things, expectations for the future in the more positive than expected. One of the main reasons isindustrial sector are steadily rising and exports are higher no doubt the sharp reduction of manpower in 2008-2009,than ever. Against this background, we expect the Danish which meant that many companies had already adjustedeconomy to expand gradually throughout 2012, primarily their cost levels to a lower level of demand.driven by higher consumer spending and substantialpublic investment. Into 2013 the upswing should become However, another reason for the falling unemploymentmore broadly based on the back of growing demand from could also be the mild winter, which permitted a relative-other countries and higher domestic investment activity. ly high activity level in for instance the construction sec-All in all, this should strengthen growth in the Danish tor. We therefore expect both unemployment and em-economy from 1¼% this year to 1¾% in 2013. ployment to remain largely unchanged towards mid- 2012. By that time the economy will have picked upMajor potential among households enough steam to trigger a significant rise in employment.Despite the crisis, households have in recent years expe- So by end-2013 we expect the number of full-time un-rienced a long period of sharply increasing disposable in- employed to have dropped by around 5,000 from the cur-comes (as a result of tax breaks and rapidly falling inter- rent level.est rates). However, the improvement in their purchasingpower has not been channelled into rising consumption, Slowing exportsbut into markedly higher savings. Therefore today there In terms of current prices, Danish exports are at an all-is huge potential for rising consumer spending among time high. Over the past year, this improvement hashouseholds. mainly stemmed from emerging markets; the demand for Danish products from the BRIC countries alone has risenWe expect households to gradually step up spending to- by more than 20%.wards the end of 2013 as rising employment, a stabilisa-tion of the housing market and sustained very low inter- In 2012 we expect Danish exports to improve further –est rates instil the necessary confidence in consumers that although growth rates will be considerably lower than inwill allow them to start reducing their savings ratio 2011 when export volumes swelled by 7.0%. One of theDenmark: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (DKKbn) 2009 2010 2011 2012E 2013EPrivate consumption 840 -4.2 1.9 -0.2 1.2 1.7Government consumption 465 2.5 0.3 -0.7 0.5 0.5Fixed investment 365 -13.4 -3.7 0.3 2.7 2.5 - government investment 33 4.6 6.9 8.0 7.0 2.0 - residential investment 98 -16.9 -9.0 8.9 1.7 1.7 - business fixed investment 234 -15.8 -2.8 -11.9 2.1 3.0Stockbuilding* 15 -2.0 0.9 0.3 0.0 0.0Exports 959 -9.8 3.2 7.0 2.5 3.5Imports 904 -11.6 3.5 5.3 2.6 3.3GDP -5.8 1.3 1.1 1.2 1.7Nominal GDP (DKKbn) 1,753 1,668 1,755 1,789 1,857 1,927Gross unemployment rate, % 4.9 6.2 6.1 6.1 5.9Gross unemployment level, 000 persons 129.0 164.9 162.3 161.1 157.5Consumer prices, % y/y 1.3 2.3 2.8 2.4 1.7Hourly earnings, % y/y 3.0 2.3 1.8 1.7 1.9Nominal house prices, one-family, % y/y -12.0 2.5 -3.5 -5.6 0.9Current account (DKKbn) 54.6 96.9 115.8 95.0 98.0- % of GDP 3.3 5.5 6.5 5.1 5.1General govt. budget balance (DKKbn) -47.4 -41.0 -85.0 -42.5- % of GDP -2.8 -2.7 -2.3 -4.6 -2.2Gross public debt, % of GDP 41.5 43.4 46.5 45.0 45.5* Contribution to GDP growth (% points)12 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 12. ■ Denmarkreasons is that the important Swedish market will weak- Major spending potential among householdsen. But the ongoing public budget tightening in manyother European markets will also curtail Danish exports,which we expect will grow by “a mere” 2.5% this year.Rebound in investment activityAs part of the government’s plan to kick-start the Danisheconomy, public investment projects to the tune of al-most DKK 11bn and DKK 8bn will be brought forwardto 2012 and 2013, respectively. Public investment activi-ty therefore looks set to accelerate further in the comingyears from an already historically high level. This pick-up will also help lifting private business investment fromthe currently very low level.Housing market under pressure Unemployment has peakedThe price declines in the Danish housing market have ac-celerated again in recent months. Measured relative tothe absolute peak in late 2007, prices have now plungedmore than 20%. Despite the likelihood of further declinesnear term, we expect house prices to stabilise towards theend of this year. Viewed in a historical perspective,house prices are thus back at the long-term equilibriumlevel. Coupled with the prospect of gradually risinggrowth and sustained very low interest rates, this sug-gests that house prices will begin to stabilise towards theend of the year.The prospect of stabilising house prices means that fixedresidential investment will continue the tentative upturn House prices back at “fair” levelseen since the beginning of 2011. Housing market activi-ty thus looks set to make a positive net contribution togrowth in the Danish economy in the coming years.Although our baseline scenario incorporates a stabilisa-tion of house prices towards end-2012 it cannot be ruledout that house prices for some time will drop considera-bly below the calculated equilibrium level – like for ex-ample during the housing market crisis in the early1990s. If a similar situation arises in the Danish housingmarket, it will hit the Danish economy through a nega-tive wealth effect for households and stricter collateralrequirements from mortgage lenders.In case house prices drop for example by another 20% Decoupling between employment and house pricesfrom current levels, this will viewed in isolation weakenconsumer spending by 2% points, reduce employment by20,000 persons and ultimately weaken GDP by 1.1%point. Viewed in this perspective, there is no doubt thathousing market trends will be crucial for the Danisheconomy going forward.Helge J. Pedersen, Global Chief Economisthelge.pedersen@nordea.com +45 33333126Jan Størup Nielsenjan.storup.nielsen@nordea.com +45 3333317113 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 13. ■ FinlandNo recession – but subdued growth continues The economic outlook has improved Exports to recover in H2 2012 Finnish goods exports contracted more than we expected Exports will recover in H2 2012 in Q4 2011 – 9% from the previous quarter. This plunge No significant slowdown in consumer price inflation will most likely remain temporary. In our view, the only reason for it was the exceptionally poor export data in Public sector deficit is decreasing October. After that, the monthly export volumes have recovered and even increased slightly. Thus, we expectWe have raised our growth forecast of the Finnish exports to rebound to the level seen in the autumneconomy to 0.5% for 2012 and to 2% for 2013. Slow already in Q1 but contract thereafter again in line with agrowth will slightly weaken employment this year, slightly downward trend. Beginning from H2 2012, werestrain the accrual of tax revenue and make it more expect a renewed recovery in international demand and adifficult to narrow the public sector financial deficit. We gradual increase in exports. This view is supported by theestimate that the unemployment rate will increase to 8% fact that the decline in new orders in the manufacturingon average in the forecast period. industry is already showing signs of stopping. The first export sectors to recover are raw materials andThe Finnish government is planning actions – both tax production supplies, while the recovery of investmenthikes and expenditure cuts – to improve the public sector goods will take longer.fiscal stance and reduce the long-term sustainability gap.We do not foresee a quick and significant fiscal policy Trade balance and current account remain in deficittightening. In 2011 the Finnish trade balance showed a deficit for the first time in two decades. Due to the dim export outlook,Growth initially leaning on households we expect the deficit to persist for at least the forecastSubdued growth hangs this year on domestic demand and period. In relation to the value of total production, weon increased consumption in particular. In 2013 net estimate the deficit to be 1% this year and 0.5% in 2013.exports will also grow with the recovery of the most The current account deficit is smaller, as it is supportedimportant export areas and boost the economy in addition by the surplus of transfers and factor income.to domestic demand. In Finland, economic activity willecho Europe, meaning that it is expected to dampen in Private consumption growth to slow down markedlyH1 2012 and start picking up again in H2 2012. There is Private consumption soared in 2011 although thestill a risk of a new recession, but we believe the risk has purchase power of households was undermined by thediminished, even though Sweden, which has a similar quicker-than-usual rise of 3.4% in consumer prices. Twoproduction structure, is already in a downturn. The major factors supporting the increased consumption wereforecast assumes that the Finnish economy will also strong wage and salary growth boosted by improvedcontract, but only in Q2 2012, which is when the employment, and the significantly decreased householddownturn in the Euro area will bottom according to our savings rate. This year, there will be less factorsestimate. promoting private consumption, slowing its growth downFinland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011 2012E 2013EPrivate consumption 96 -2.7 3.0 3.3 1.4 1.9Government consumption 42 1.1 0.2 0.8 0.3 0.5Fixed investment 40 -13.3 2.6 4.6 -1.0 0.6Stockbuilding* 2 -1.9 0.9 1.3 0.0 0.0Exports 87 -21.5 7.8 -0.8 -0.3 5.7Imports 80 -16.4 7.7 0.1 0.1 4.8GDP -8.4 3.7 2.9 0.5 2.0Nominal GDP (EURbn) 185.7 172.5 179.7 191.6 196.6 204.2Unemployment rate, % 8.2 8.4 7.8 8.0 8.0Industrial production, % y/y -22.8 10.4 1.9 -2.0 3.0Consumer prices, % y/y 0.0 1.2 3.4 3.0 2.5Hourly w ages, % y/y 4.0 2.6 2.7 3.8 3.0Current account (EURbn) 3.4 2.5 -0.8 -1.2 -0.4 - % of GDP 2.0 1.4 -0.4 -0.6 -0.2Trade balance (EURbn) 3.0 2.5 -1.0 -1.9 -1.1 - % of GDP 1.7 1.4 -0.5 -1.0 -0.5General govt budget balance (EURbn) -4.3 -4.6 -0.9 -0.4 0.2- % of GDP -2.5 -2.6 -0.5 -0.2 0.1Gross public debt (EURbn) 75.0 87.0 93.0 98.0 102.5- % of GDP 43.5 48.4 48.5 49.8 50.2* Contribution to GDP growth (% points)14 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 14. ■ Finlandto little less than 1.5%. Slow economic growth will Economic sentiment points to weaker growthreduce employment somewhat and hinder wage sumgrowth, which is fully dependent on higher earnedincome. Growth is also supported by pensions, whichwere raised more than usual at the turn of the year. Dueto the continued quick rise in consumer prices, thepurchasing power of households will improve only alittle in real terms. As there is now less room forreducing savings, we estimate that the savings rate willcontinue to decrease only slightly.Only small changes in investment likelyThe short-term investment outlook is a little brighter thanwe estimated in December. Housing starts indicate thatconstruction volumes will remain high at least until the … but US PMI suggests a recovery round the cornerautumn. However, we expect construction to contract inH2 2012 and also slow down investment growth in 2013.Growth in machinery and equipment investmentoutperformed growth in total production in 2011. Due tothe decreased industrial capacity utilisation rate, we alsoexpect machinery investment to contract and not pick upagain until late 2012.Inflation to remain relatively highThe rise in consumer prices continued to be a little above3% in January–February 2012, which is only slightly lessthan in 2011 on average. The rise was based on severalcommodity tax increases implemented at the turn of theyear and some seasonal factors. In 2012 the price risewill be curbed by lower mortgage rates and decreasing Exports may not fall much longerhousing prices. However, there will also be upwardpressure from the weaker euro and import prices.Consequently, our estimate is that consumer prices willrise 3% in 2012 and 2.5% in 2013.Slower decrease in public sector deficitThe public sector financial deficit shrank more thanexpected last year and was 0.5% relative to totalproduction. The deficit of central government financeswas expected to be the biggest challenge, but itcontracted heavily to below 3%. Due to subdued growthin the coming years, the decrease in the public sectordeficit will be slower. The deficit is estimated to decreaseto 0.2% of GDP in 2012 and turn into a small surplus in2013. Central government borrowing will raise the public Retail sales are expected to weaken furtherdebt to about 50% of total production.Pasi Sorjonenpasi.sorjonen@nordea.com +358 9 165 5994215 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 15. ■ USAEvery silver lining has a cloud Slowly towards self-sustaining upswing number of foreclosures, this is expected to lead to further price declines near term. The decline in house prices is Economy to hit soft patch later this year … expected to contribute to a modest upward correction in … before a renewed pick-up in 2013 households’ propensity to save, which has actually trend- ed lower over the past year. The Fed is bluffing – tightening to begin in late 2013 Secondly, we expect consumers and businesses to beSlowly towards self-sustaining upswing more cautious in terms of spending and investing laterThe recovery of the US economy is expected to continue this year when attention focuses more sharply on the fis-during the entire forecast period, and towards the end of cal policy outlook in 2013.2013 it is expected to be strong enough to be called self-sustaining. At this time the central bank is therefore like- Under current law, we estimate that the fiscal drag willly to allow itself an exit from its very lenient monetary amount to a massive 4½% of GDP in 2013 as the tempo-policy. But before we get this far, the economy must rary payroll tax cut, the extended unemployment benefitsovercome several hurdles, which are likely to slow down as well as the Bush tax cuts from 2001 and 2003 are allthe recovery later this year. But it should only be a tem- set to expire and the scheduled across-the-board spendingporary soft patch. The reason is that employment has cuts in the debt ceiling deal are initiated.now picked up to a degree that provides some protectionagainst the headwind that seems to be replacing the latest Fiscal tightening of this magnitude could easily trigger atailwind from the unusually mild winter weather and new recession. But we do expect politicians to agree oncecompanies’ brief inventory build-up. The latter contrib- again to extend most of these otherwise expiringuted almost 2% point to GDP growth of 3% in Q4 last measures into 2013. But in light of the November elec-year. tions a sudden end to the political gridlock in Washing- ton seems rather unlikely. And because policy makersFirstly, housing prices are estimated to decline by an ad- have so much on their plate, it is unlikely that a fiscalditional 5% this year followed by stabilisation in 2013 shock can be completely avoided in the lame duck ses-and then slow recovery. This will correspond to an over- sion of Congress in November and December 2012. Be-all drop in average national house prices of almost 40% cause of this risk we expect households and businesses tofrom the peak in early 2006. turn more cautious later this year, awaiting future policy changes.House prices admittedly seem to be close to “fair value”and housing affordability has risen markedly. But the Thirdly, high oil prices are also expected to slow downmarket is still characterised by a massive excess supply growth slightly in coming months. Petrol prices areof homes, and the ability of many households to qualify quickly approaching USD 4 per gallon – a level whichfor a mortgage is still keeping demand at historically low just under a year ago turned out to adversely affect con-levels. Coupled with an expected acceleration in the sumer spending. We do not think that the low level ofUSA: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (USDbn) 2009 2010 2011E 2012E 2013EPrivate consumption 10,035.5 -1.9 2.0 2.2 1.8 2.0Government consumption and investment 2,878.1 1.7 0.7 -2.1 -1.4 -0.9Private f ixed investment 2,128.7 -18.8 2.6 6.7 5.9 6.0 - residential investment 472.4 -22.2 -4.3 -1.4 6.3 7.1 - equipment and sof tw are 1,070.0 -16.0 14.6 10.2 6.7 6.0 - non-residential structures 586.3 -21.2 -15.8 4.4 2.7 4.6Stockbuilding* -41.1 -0.8 1.6 -0.2 0.2 0.1Exports 1,846.8 -9.4 11.3 6.8 4.5 6.4Imports 2,556.5 -13.6 12.5 4.9 2.8 5.6GDP -3.5 3.0 1.7 2.0 2.2Nominal GDP (USDbn) 14,291.6 13,938.9 14,526.6 15,094.4 15,707.5 16,293.8Unemployment rate, % 9.3 9.6 9.0 8.2 7.6Industrial production, % y/y -11.2 5.3 4.2 2.9 3.3Consumer prices, % y/y -0.3 1.6 3.1 2.5 1.9Consumer prices ex. energy and f ood, % y/y 1.7 1.0 1.7 2.1 2.0Hourly earnings, % y/y 2.7 1.8 2.0 2.0 2.2Current account (USDbn) -376.6 -470.9 -473.4 -471.2 -570.3 - % of GDP -2.7 -3.2 -3.1 -3.0 -3.5Federal budget balance (USDbn) -1,412.7 -1,293.5 -1,300.0 -1,200.0 -900.0- % of GDP -10.1 -8.9 -8.6 -7.6 -5.5Gross public debt, % of GDP 87.6 95.2 99.5 107.1 112.7* Contribution to GDP growth (% points)16 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 16. ■ USAnatural gas prices will offset much of the increase in oil US economy to hit a temporary soft patch in 2012…and gasoline prices, because expenditure on natural gas isonly one-ninth of expenditure on oil and oil products.Lastly, the recovery of the US economy is expected to betemporarily impeded by the continued recession in theEuro area, which is not likely to be over until Q3 2012.Overall, this means that after GDP growth of 3% in Q4last year, we expect growth of 2% in H1 2012 and 1½%in H2 2012 (annualised), corresponding to a growth rateof 2% for the full year. In step with the fading of thegrowth-curbing factors this year, economic growth isprojected to pick up to 2.2% in 2013 as a whole, which isconsidered to be in line with the long-term growth poten- … partly because “taxmageddon” looms in 2013tial of the economy.Unemployment to stall at high levelThe US labour market has clearly been one of the brightspots lately. Employment has risen by almost 250,000 onaverage over the past three months. And unemploymenthas dropped to 8.3% – which is 0.7% point lower than ayear ago and markedly below the 2009 peak of 10%.But we doubt that labour market progress will remainquite so rapid. First, we estimate that the mild weatherhas cumulatively added about 120,000 to the level ofemployment over the past three months, and this boostshould soon start to unwind. But even apart from weatherissues, the recent strength in the labour market seems out Fortunately, the labour market has turned a corner…of line with other measures of activity. Thus, GDPgrowth seems to be tracking 2% in the current quarter.Such a pace is below the economy’s longer-term poten-tial and well below the rates needed to sustain the recentpace of job growth. Against this background and becauseof recent evidence that labour force participation has fi-nally stopped falling, we expect the unemployment rateto fall only marginally further in the remainder of theyear. Thus, our end-2012 unemployment rate forecast is8%, while the end-2013 forecast is 7.5%.Fed: more easing before tightening?With economic slack persisting and inflation pressuresfading we think that the Fed will announce further easing … and the deleveraging process has slowed downbefore the end of Q2 when Operation Twist concludes,possibly choosing to sterilise the liquidity impact of anyadditional asset purchases via reverse repos. Longer out,however, we believe markets will cease to believe in theFed’s commitment to keep rates on hold until at least late2014. Even given our somewhat weaker growth outlookcompared to the Fed’s current projections the centralbank’s commitment looks rather unlikely to us, given itspast reactions to growth and inflation. Thus, we believethe economic environment will lead to the start of Fedtightening in late 2013.Johnny Bo Jakobsenjohnny.jakobsen@nordea.com +45 3333 617817 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 17. ■ Euro areaBack from the dead – but pulse still very weak The ECB has succeeded in stabilising the Euro area In the short term, the damage wrought by the financial Politics could still trigger a relapse in debt crisis crisis towards the end of 2011 will still be felt in the real Exports will be key growth driver economy during the first half of 2012. The scramble among banks to bring their tier 1 core capital ratios above The ECB to remain on hold as growth stays weak 9% by the end of June points to a risk of continued tight- ness of credit conditions over the next couple of monthsDisaster has been avoided in spite of the ECB’s 3-year LTROs. Once again, theIt may be too strong to say that the Euro area had a near negative effects on growth are likely to be strongest in It-death experience towards the end of last year, but the aly and Spain, since the banks in these countries face thesovereign debt crisis certainly threatened to throw the biggest recapitalisation needs.Euro area into another deep recession just three years af-ter the collapse of Lehman Brothers. In this light the Politics could still trigger a relapse in debt crisisECB’s decision to launch two 3-year lending operations The escalation of the debt crisis into a full-blown finan-(LTROs) vis-à-vis Euro area banks has been an important cial crisis last autumn was as much about politics as eco-lifesaver. Indeed, the positive effects of the nearly 1 tril- nomic fundamentals. Looking ahead, political develop-lion EUR pumped into banks through the 3-year LTROs ments could still trigger a resurgence of damaging vola-are almost impossible to overstate. In government debt tility in financial markets. In general, the return to calmermarkets yield spreads for Spain and Italy vs Germany conditions in financial markets after the ECB’s 3-yearhave narrowed substantially, while funding conditions LTRO’s could easily lead to political complacency, bothfor Euro-area banks no longer threaten to unleash another with respect to adjustment efforts and support for bolster-credit crunch on households and businesses. ing Euro-area rescue funds. Specifically, the upcoming presidential elections in France could threaten the Fran-Sovereign debt crisis far from resolved co-German agreement to focus on stronger surveillanceStill, the economic pulse of the Euro area is most likely of fiscal policy through the fiscal compact. In Italy, theto stay quite weak over the next couple of years. The successful technocratic Prime Minister Mario Monti hassovereign debt crisis is far from resolved, pointing to declared that he will step down before parliamentaryseveral years of fiscal austerity and structural reform, not elections are held in June 2013 at the latest, suggestingleast in Greece, Italy, Ireland, Spain and Portugal that the momentum behind structural reforms could be(GIISP). Combined with substantial fiscal tightening in short-lived. Finally, investors are still sceptical about theseveral other member states, including France, the tight- political pledges that the Greek debt rescheduling was aening of fiscal policy could subtract as much as 1% point unique case, not to be repeated in conjunction with futurefrom growth in 2012 and 2013 each. Naturally, the rescue packages in the Euro area. The latter concern isgrowth dampening effects from fiscal policy are likely to affecting Portugal in particular.be strongest in Italy and Spain, while Germany shouldcontinue to be the strongest growth performer, as fiscalpolicy will only be tightened modestly.Euro area: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011 2012E 2013EPrivate consumption 5,158 -1.2 0.8 0.2 -0.8 -0.3Government consumption 1,898 2.6 0.5 0.1 -0.3 0.0Fixed investment 1,987 -12.0 -0.7 1.6 -2.2 1.4Stockbuilding* 62 -0.9 0.6 0.0 -0.6 0.0Exports 3,878 -12.7 11.1 6.3 1.9 4.8Imports 3,792 -11.6 9.4 4.0 -0.3 3.1Net exports* 86 -0.7 0.8 1.0 0.9 0.9GDP -4.2 1.8 1.5 -0.4 1.0Nominal GDP (EURbn) 9,238 8,929 9,153 9,414 9,530 9,773Unemployment rate, % 9.7 10.1 10.0 11.0 11.0Industrial production, % y/y -3.2 4.8 -0.1 -0.5 2.0Consumer prices, % y/y (HICP) 0.3 1.6 2.7 2.3 1.8 - core inflation 1.3 0.9 1.6 1.6 1.2Hourly labour cost, w ages and salaries % y/y 1.4 1.6 2.2 2.1 1.6Current account (EURbn) -28 -46 -31 -25 -20 - % of GDP -0.3 -0.5 -0.3 -0.3 -0.2General govt budget balance, % of GDP -6.3 -6.2 -4.1 -3.3 -2.7Gross public debt, % of GDP 79.1 84.7 86.5 88.7 89.2* Contribution to GDP growth (% points)18 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 18. ■ Euro areaExports will be the key growth driver The recovery is likely to be very gradualIn our main scenario we expect the Euro area to return tomodest positive growth in Q3 this year. A primary con-tributor will be net exports, as we expect export growthto outpace imports throughout the forecast horizon. Thisdevelopment will be driven by sluggish growth in do-mestic demand and the continuous weakening of theEUR against most other currencies. Indeed, the contribu-tion to Euro-area growth from a weaker EUR could bequite substantial towards the end of the forecast horizon.A major casualty of the substantial credit tightening lastautumn was business investment, which dropped sub-stantially. Going forward, we expect that a normalisationof credit conditions of Euro-area banks will at least stop Financial conditions point to rebound in activitythe decline in lending to non-financial companies, andthis is expected to pave the way for a short-term boost togrowth from inventory rebuilding and business invest-ment. Further out on the forecast horizon, we expect thegradual improvement in demand conditions to lend addi-tional support to investments.The Achilles heel for economic growth will no doubt beprivate consumption, which will be burdened by fiscalconsolidation throughout the forecast horizon. In addi-tion, real disposable incomes will remain under pressureas higher oil prices keep inflation elevated through mostof the forecast horizon. With employment set to declinefurther for at least the first half of 2012, there will not bemuch support from the labour market either. Household savings already at a low levelThe ECB to stay on hold in spite of high inflationThe recent rise in oil prices and the slight weakening ofthe EUR has kept inflation well above the ECB’s medi-um-term target of just below but close to 2%. In addition,hikes in VAT rates and other indirect taxes pushed upcore inflation in 2011. The underlying inflationary pres-sure is very moderate, however, as rising unemploymentputs downwards pressure on wages and declining con-sumption makes it more difficult for companies to passon price increases to consumers. Looking forward, weexpect inflation to gradually drop below 2% in the courseof 2012. In 2013 inflation is likely to stabilise just below2%, but a sharp rise in energy prices could at least tem-porarily push inflation above the ECB’s target. Ample liquidity keeps money market rates lowAgainst this background, we expect the ECB to keep in-terest rates stable over the forecast horizon. With the re-cent stabilisation of financial markets, the prospect offurther 3-year LTROs or other liquidity measures alsoseems remote for the time being. Indeed, some membersof the governing council have voiced their increasingconcern about the risks associated with this policy. Con-sequently, the ECB now seems to have done its bit toquell the Euro-area debt crisis, and it is now up to politi-cians to provide the long-term solutions.Anders Matzenanders.matzen@nordea.com +45 3333 331819 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 19. ■ United KingdomHistorically weak recovery will gain a bit more speedThe recovery in the UK economy has been tremendously Very slow recoveryweak since the Great Recession hit the country in 2008 –and it has now been even weaker than the recovery afterthe depression during the 1930s. Despite this the latesteconomic data suggested a slightly more optimistic toneas the improved outlook for the US economy and the ris-ing risk appetite in financial markets have helped thestruggling UK economy to gain some momentum.The main reason for the very weak recovery is the launchof an ambitious plan to restore public budget balance. Sofar the government has been able to keep the plan ontrack, thereby maintaining high credibility about UK fis-cal policy. But at the same time, this has made the joblessrate soar to the highest level in over 15 years. Short term sentiment has improvedIn order to try to offset the very tight fiscal policy theBank of England (BoE) has maintained a very lenientmonetary policy – although consumer prices have surgedand are still well above the official 2% target. In Febru-ary the MPC decided to yet again extend the asset pur-chase facility (APF) by GBP 50bn to GBP 325bn in or-der to keep inflation at 2% over the medium-term hori-zon and to stimulate the struggling economy. The currentprogramme of asset purchases is expected to be complet-ed in May. At that time we expect the BoE to announce afurther increase in the QE programme.We expect the combination of the very aggressivemeasures from the BoE and the gradual improvement in Inflation is heading lowerthe Euro area to cause overall activity in the UK to growgradually throughout our forecast horizon. Especiallytowards the end of our forecast period, we expect the UKto begin to reap the benefits in step with consumerspending accelerating and the pressure from the publicbudget cuts starting to ease.Jan Størup Nielsenjan.storup.nielsen@nordea.com +45 3333 3171United Kingdom: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (GBPbn) 2009 2010 2011 2012E 2013EPrivate consumption 928.0 -3.5 1.2 -0.6 0.9 1.7Government consumption 314.0 -0.1 1.5 1.0 0.2 -0.8Fixed investment 240.4 -13.4 3.1 -2.6 -0.4 3.5Stockbuilding* 0.3 -1.0 1.3 -0.1 0.0 0.0Exports 422.9 -9.5 7.4 4.9 3.3 5.7Imports 460.7 -12.2 8.6 0.4 2.7 4.5GDP -4.4 2.1 0.9 0.7 1.8Nominal GDP (GBPbn) 1433.9 1393.9 1463.7 1522.0 1561.6 1616.4Unemployment rate, % 5.6 7.6 7.8 8.1 8.8 8.7Consumer prices, % y/y 3.6 2.2 3.3 4.5 2.5 2.0Current account, % of GDP -1.5 -1.7 -3.3 -2.8 -1.7 -1.5General govt budget balance, % of GDP -5.0 -11.3 -10.1 -8.2 -7.2 -5.6Gross public debt, % of GDP 54.8 69.7 79.6 85.9 89.0 91.0* Contribution to GDP growth (% points)20 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 20. ■ JapanReturn to a more stable recoveryJapan’s economic recovery from the 2008-2009 recession Economic recovery destroyed by the earthquakewas clearly destroyed by the earthquake one year ago.However, thanks to a boost from reconstruction-relatedpublic spending and a release of pent-up demand theeconomy is likely to see above-potential growth in H12012, in the range of 2-3% on an annualised basis. Poten-tial growth is estimated to be about 1% per year.But as the impact of reconstruction demand starts to fade,the economy is expected to return to a more stable recov-ery path with growth averaging 1-2% in H2 2012 and2013, when stronger global growth should alleviate thepressure from continued JPY strength. In addition, to-wards the very end of the forecast horizon we could see atemporary surge in domestic demand ahead of an antici- Deflation to disappear in 2013 at the earliestpated 3% point consumption tax increase in April 2014.With production now probably around 4% below poten-tial we expect core inflation to remain in negative territo-ry until at least the end of 2013. But based on the Bankof Japan’s rather passive and incremental strategy we seelittle chance of further easing after the central bank’s de-cision in February to increase its asset purchase pro-gramme from JPY 55trn to JPY 65trn, to be fully imple-mented by end-2012.In 2011 Japan logged the first annual foreign trade deficitin more than 30 years. This has called into question howmuch longer the country can rely on exports to help fi-nance the huge public budget deficit. However, while Ja- Sustained current account surpluspan’s trade balance might continue to show a deficit ofaround ½% of GDP in 2012 and 2013, the current ac-count balance is forecast to continue to show a surplus of2-2½% of GDP, thanks to a huge surplus on the incomebalance stemming from returns on the country’s hugeportfolio of investments abroad. In other words, we ex-pect Japan to continue to be able to finance its publicdebt without having to turn to foreign investors.Johnny Bo Jakobsenjohnny.jakobsen@nordea.com +45 3333 6178Japan: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (JPYbn) 2009 2010 2011 2012E 2013EPrivate consumption 292,523.2 -0.7 2.6 0.0 1.5 1.3Government consumption 92,217.6 2.3 2.1 2.1 1.2 1.4Gross fixed capital formation 118,236.7 -10.4 -0.1 0.6 4.6 1.0Stockbuilding* 3910.4 -1.5 0.7 -0.5 0.2 0.2Exports 90,830.4 -24.4 24.4 0.0 2.2 5.1Imports 82,198.0 -15.8 11.1 5.8 4.3 5.2GDP -5.5 4.5 -0.7 2.0 1.5Nominal GDP (JPYbn) 515,520.4 504,377.6 470,936.6 479,179.1 483,985.5 491,432.4Unemployment rate, % 5.1 5.1 4.6 4.5 4.3Consumer prices, % y/y -1.3 -0.7 -0.3 -0.4 -0.2Current account, % of GDP 2.8 3.6 2.1 2.0 2.5General government budget balance, % of GDP -8.5 -8.5 -10.1 -10.0 -9.0* Contribution to GDP growth (% points)21 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 21. ■ PolandMore resilient than expected Economy more resilient than expected … area. This will be gradually filtering through to the Polish economy during 2012 and the sluggish recovery of the … but moderate slowdown set to come soon Euro-area economy in the second half of this year will Central bank in wait-and-see mode not give much boost to the Polish economy in 2013. Political stability supportive for fiscal reform plans There will be several negative factors for consumption demand. First, a softer labour market and a very slow de-Economy doing better than expected … crease in inflation will adversely affect real incomeEven before risks for the Euro area were reduced thanks growth. Second, following the drop in the savings rate into the ECB’s LTROs, the Polish economy had been per- 2010-11, this will not be a supportive factor for con-forming stronger than expected. GDP growth remained sumption anymore. Third, households will have limitedabove 4% throughout 2011, with a surprising slight ac- access to credit due to regulatory changes.celeration to 4.3% y/y in the final quarter of last year.There was a gradual slowdown in consumption demand Another important factor exerting negative pressure ongrowth during 2011 due to some softening of labour domestic economic activity within the next two yearsmarket conditions, but this was offset by a strengthening will be continued fiscal consolidation. New spendingof investment activity. A positive contribution from net rules imposed on the central budget and local govern-exports also played a key role, especially in the second ments will be a constraint on both public consumptionhalf of last year when the PLN depreciated considerably. and public investment. The negative impact on public in- vestments will be particularly important, leading to lowerOne of the key reasons for the outperformance by the absorption of EU funds. The contribution of public in-sixth-largest economy in the EU is that deleveraging of vestments to GDP growth is likely to turn negative in thethe private sector is not needed (the private sector debt- final quarter of 2012 and remain a drag on economicto-GDP ratio for Poland is at one of the lowest levels in growth until early 2014.the EU). Other factors are the relatively low reliance onexternal demand coupled with a favourable geographical While the outlook for public investments is quite bleak,structure of exports (with Germany by far the largest there should be still solid increase in fixed investment intrading partner), a sound banking sector (in 2011 banks the private sector. Enterprises operating in Poland areoperating in Poland had record-high profits, high average likely to expand their capacity as they have record-highTier 1 capital ratio around 13% and low NPLs) and a profits and low indebtedness, and credit flows to the cor-continued strong rise in public investment connected porate sector started to pick up sharply in the second halfwith the use of EU funds for large infrastructure projects. of 2011. What is more, Poland is seen as an increasinglyMost of these factors will contribute to a relatively strong attractive location for FDI.economic performance also in 2012-13. However, thepositive influence of some of them will gradually fade Oasis of political stabilityand this, together with some new headwinds, will lead to While fiscal consolidation will have some negative im-a moderate slowdown in economic growth. pact on economic activity, further progress in fiscal defi- cit reduction is positive for Poland’s credibility in finan-… but moderate slowdown ahead cial markets. From this point of view, it is important thatThe key reason for the economic slowdown ahead will be the plan for austerity measures and structural reformsthe lagged negative impact of the recession in the Euro seems credible given the stable political situation in Po-Poland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (PLNbn) 2009 2010 2011 2012E 2013EPrivate consumption 774 2.1 3.2 3.1 2.3 2.5Government consumption 236 2.0 4.4 -0.7 0.0 2.0Gross fixed capital formation 284 -1.2 -0.2 8.5 6.3 3.5Exports 509 -6.8 12.1 7.3 -0.1 2.4Imports 560 -12.4 13.9 5.9 -1.7 2.2GDP 1.6 3.9 4.3 3.1 3.2Nominal GDP (PLNbn) 1,275 1,343 1,415 1,523 1,630 1,703Unemployment rate LFS, % 9.0 9.6 9.9 10.2 9.8Consumer prices, % y/y 3.5 2.6 4.3 3.8 2.7Current account, % of GDP -3.9 -4.7 -4.1 -3.8 -3.5General government budget balance, % of GDP -7.3 -7.9 -5.4 -3.2 -2.8* Contribution to GDP growth (% points)22 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 22. ■ Polandland following the parliamentary elections in October Investment activity key driver for GDP growth2011. Despite some tensions between the coalition part-ners (the liberal and pro-reform Civic Platform and theless reform-minded Peasants’ Party), all the serious re-forms, including a higher retirement age, are likely to bepushed through. The political cost of reforms seems lowgiven that the next elections will take place in 2014. Thismakes Poland an oasis of political stability against thebackground of heavy election calendars in developed andemerging economies.External imbalances under controlSubstantial depreciation of the PLN as well as gradualweakening of domestic demand led to a clear narrowingof the current account deficit in the last months of 2011. Increasingly attractive location for FDIAt the same time, the current account gap was increas-ingly covered by inflows of long-term capital (FDI andEU funds). These positive developments should continuein 2012, contributing to an improvement in the assess-ment of the country’s macroeconomic fundamentals.Inflation to fall off the highs …On the back of strong base effects, the PLN appreciationand weakening domestic demand growth, the headline in-flation rate will be trending lower in 2012-13. The keyrisk for the expected disinflation is the situation in thecommodities markets, especially crude oil prices. How-ever, while last year crude oil prices in PLN went up byover 40%, in our baseline scenario we expect the growthwill slow down to ca. 20% in 2012 and 10% in 2013. Fiscal consolidation on the way… paving the way for cautious monetary easingThe drop in inflation will provide some room for centralbankers to support the weakening economy with cautiousrate cuts. An important argument for the Polish MPC infavour of a reduction in borrowing costs will be the pro-gress in fiscal consolidation, leading to an improvementin the policy mix. We expect that interest rates will bereduced by 50 bp in total in two moves of 25 bp each inQ4 2012, which will be followed by stable rates in 2013.PLN getting strongerDecreased risks for the Euro area (lowering global riskperception, which remains the key driver for the PLN), Inflation drop to pave way for monetary easingthe strong resilience of the Polish economy to externalshocks and better chances of further progress in fiscalconsolidation lead to an improvement in our PLN fore-casts. However, with many event risks on the globalmarkets, the PLN is likely to remain volatile, especiallyin the first half of 2012.Piotr Bujakpiotr.bujak@nordea.com piotr.bujak@nordea.com23 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 23. ■ RussiaPutin is back – inflation will follow Real wage growth will support households Domestic capital investment is still 20% below pre- Lehman levels. But even last year when liquidity was Low inflation will not last – CBR to react in H2 ample, the Russian companies did not take the opportuni- ty to invest, but rather increased savings: the lack of capi- tal investment in the Russian economy is also reflected inHousehold consumption accelerated sharply in Q4 2011 capital outflows, which increased to USD 84bn in 2011.and has started the year with above-trend growth. The la- This lack of willingness can be attributed to perceivedbour market keeps strengthening and the rapid decline in risks, the business climate and the election cycle. Theunemployment over the past months will support real impact of the outcome of the presidential elections, Mrwage growth in the coming quarters. The purchasing Putin’s victory, is still not certain. On the one hand, itpower of the Russian consumers is supported by the de- suggests status quo, hence less potential for capital flightcline in inflation, as it dropped from nearly 10% at the from government-related entities. But on the other handbeginning of 2011 to under 4% early this year. private businesses may be disappointed and scale down investment plans.The March presidential elections delivered no surprises:Mr Putin is back for the next 6-year period, and he will We believe fixed capital investment growth will remainappoint former President Medvedev prime minister. We above 7% y/y in 2012, which is still a very moderate rateexpect no major changes, but the strategic focus is clearly compared to the pre-Lehman years when investments ex-set on expansion of the middle class from the current panded at an annual rate of around 20%.20% to 40% by 2020. This will be marked by pro-consumer policies. In the short term the risk is that Inflation is bottoming outmeasures such as wage increases will have a pro- Inflation, which is the key concern of the Russian popu-inflationary effect. But in the longer run “supply-side” lation according to surveys, declined to historical lows ofsteps such as Russia’s entry into the WTO last year and under 4% at the beginning of 2012, which is an all-timeprivatisation of the large state companies should sharpen low in modern Russia’s history.foreign competition and gradually help reduce consumerprices. This trend was primarily driven by the deceleration of food prices, as food price inflation has declined to belowFixed capital investment accelerated, but … 2%, down from the 14.20% y/y peak in Q1 2011.Fixed capital investment growth, which undershot our Another part of the deceleration did not happen withoutforecast in H1 2011, has improved significantly in line the “invisible hand” of the Russian government. Prior towith our expectations, accelerating to above 10% y/y at the elections, Putin’s government froze petrol prices andthe beginning of 2012. This trend was underpinned by postponed the usual utility tariff hikes to July this year.the construction sector, which picked up markedly overthe past quarters and growth in imports of machinery While inflation will hover at historical lows in Q1, it isgoods accelerating early this year. set to pick up again in mid-2012. The base effects will fade by June and over the summer we estimate that weThe outlook for investment, however, is more uncertain will see a full 1% point rise in headline CPI just becausethan for households. One key challenge for the corporate of the base effects. The utility tariff hikes in July shouldsector is the tighter credit markets. Average short-term add around 1-1.5% points. Thus, inflation will jump bycredit rates have picked up by around 200 bp over the 2-3% points in the summer, and we will again see head-past few months. Credit to corporates has slowed down line inflation at above 6% in early September.and we expect more of the negative effects of moneymarket tightening to be felt in the coming quarters.Russia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (RUBbn) 2009 2010 2011 2012E 2013EPrivate consumption 20,184 -4.8 3.0 6.0 6.2 6.4Government consumption 7,360 0.2 1.4 1.3 1.6 1.8Fixed investment 9,201 -14.4 6.1 6.5 7.2 8.0Exports 13,074 -4.7 7.1 3.5 3.8 5.2Imports 9,111 -30.4 25.6 14.5 10.0 12.5GDP -7.8 4.0 4.4 4.3 5.0Nominal GDP (RUBbn) 41,277 39,064 45,300 47,293 49,327 51,793Unemployment rate, % 8.4 7.5 6.5 5.8 5.5Consumer prices, % y/y 11.7 6.9 8.5 6.3 7.0Current account, % of GDP 4.0 4.8 4.5 3.8 3.3Central govt budget balance, % of GDP -5.9 -4.0 0.5 0.7 1.024 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 24. ■ RussiaThe era of excess liquidity is over Strong labour market will support householdsThe deceleration of headline inflation has allowed theCBR to lower the “signalling” refinancing rates by 25 bpin early 2012. While with the pro-easing bias globally theshort-term risk is that the CBR will follow with easingmoves in the coming months, our baseline is that it willremain on hold.The CBR maintains that the goal for 2011 is to keep in-flation within 5-6%. With the expected acceleration in in-flation later this year, the CBR is facing a big challengeto achieve this inflation target. Thus, we expect policytightening to resume later this year with a hike in bench-mark repo rates. The new normal: banks as net borrowers from CBRThe government expects to reduce inflation to 4-5% by2014-2015. In our view, this is ambitious, but judgingfrom recent comments from both the central bank andPutin’s government it seems that they are willing to pur-sue these targets. This will require more action from theCBR in the coming years – in the form of tighter inter-bank liquidity and higher interest rates.Towards a “free float”The RUB managed to recover from the losses in August-September 2011 and the CBR switched from interven-tions in support of RUB to those aimed at smoothing thestrengthening trend in early 2012, albeit with very sym-bolic amounts.The CBR widened the RUB basket (USD 55% and EUR The tightening cycle will continue in H245%) floating corridor further from RUB 5 to RUB 6(32.20-38.20) at the end of 2011. Its strategic goal is tolet the RUB be more flexible, which will be consistentwith the bank’s move towards inflation targeting and amore hands-on interest rate policy.We expect more RUB band widening in the comingyears. The timing, however, is quite uncertain. If recenthistory is anything to go by, the widening should occurwhen the RUB is strengthening. This is perfectly con-sistent with the CBR’s goal of keeping excess RUB li-quidity low (as USD purchases create RUB liquidity) andeventually meeting inflation targets. The RUB will act asa complement in the CBR’s toolbox – each 1% strength-ening of the RUB effective exchange rate brings headline RUB to keep strengthening against the basketCPI down by 0.25%, if sustained.A more flexible RUB will be more responsive to marketprices, which creates both strengthening opportunitiesand risks. We see a stronger RUB, on average, based onour oil forecast of USD 120/bbl this year (above thebudget average of USD 100/bbl for the coming years).But short-term market volatility and increases in riskaversion will not fail to impact the RUB, which is stillseen as a “risky” cyclical asset among the investors.Aurelija Augulytėaurelija.augulyte@nordea.com +45 3333 643725 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 25. ■ EstoniaRobust export-led growth loses steamThe robust growth of 7.6% y/y in 2011 was export-led. Softer export growth lies aheadExports grew last year on the back of supportive foreigndemand for especially industrial goods. Last year was asuccessful year for enterprises with sales volumes andprofits up by 18% and 40% y/y, respectively. Brighterprospects for the corporate sector led to a marked pick-upin both fixed investment and employment. Growth in theexport-oriented sectors started to gradually spill over tothe domestic economy as well.The resurgence of the sovereign debt crisis has changedthe prospects for the export-led recovery. The EU and theEuro area account for roughly 66% and 30% of total ex-ports. Headwinds from the debt crisis alongside high oilprices pose the key risks to the economy. The deteriora- Manufacturing growth trends still lowertion of manufacturing confidence was accompanied by amarked deceleration of manufacturing goods exports.The reduction in export volume was initially concentrat-ed in the key machinery and equipment sector, but is ex-pected to broaden to other investment goods as the Euroarea underperforms. Confidence and low export ordersstill point to the continuation of the downtrend.The economy will remain in a soft patch until exportspick up, presumably in the second half of the year. Dur-ing this interim period growth will depend on domesticdemand. The economy is expected to further deceleratein H1 2011 with negative contributions from net exportsand moderating investment. With production exceedingpre-crisis levels and productivity growth continuing into Retail sales growth moderates only slightlythe third year, companies still continue to invest, albeit ata slower rate. Consumer demand is expected to continueat a slightly slower pace compared to last year. No majorpullback in purchases is foreseen despite the persistingfragile consumer confidence. This asymmetry is illustrat-ed by the divergence of consumer confidence and retailvolume. The positive effects from employment growth,wage growth and pent-up demand as a result of austeritymeasures are, however, expected to support demand.Tönu Palmtonu.palm@nordea.com + 372 628 3345Annika Lindbladannika.lindblad@nordea.com + 358 9 165 59940Estonia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011 2012E 2013EPrivate consumption 8.9 -18.4 -1.7 4.2 2.8 4.0Government consumption 3.1 -1.7 -1.1 1.9 1.0 1.2Gross fixed capital formation 4.8 -32.9 -9.1 26.0 5.5 9.0Exports 11.5 -18.7 22.5 26.3 2.3 8.0Imports 12.2 -32.6 21.0 28.0 3.0 8.5GDP -13.9 2.3 7.6 2.0 4.2Nominal GDP (EURbn) 16.3 13.8 14.3 16.0 16.9 18.2Unemployment rate, % 13.8 16.9 12.5 10.7 8.9Consumer prices, % y/y -0.1 3.0 5.0 3.5 3.7Current account, % of GDP 4.5 2.8 3.2 -0.2 -0.8General government budget balance, % of GDP -1.7 0.1 0.8 -2.8 -0.526 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 26. ■ LatviaMoving forward despite strong headwindsIn 2011 the economy grew by 5.5%, considerably above GDP still on a steady upward trendinitial expectations. In absolute terms more than two-thirds of the growth came from only three sectors – trade,manufacturing and transport. The sectoral distribution ofgrowth shows a healthy mix between domestic demandand export-oriented sectors. Looking at 2012 the head-winds still appear strong, although we have revised ourgrowth forecast higher. The main reason is better growthexpectations in the Baltic Rim region, which is the mostimportant export destination for Latvia, following thehuge liquidity injection by the ECB. At the same timedeleveraging is seen continuing in 2012, unemploymentis expected to decline only marginally and fixed invest-ment is expected to grow at a slower pace than in 2011,all of which will slow down domestic demand growth, Markets trusting Latvia and its currency againwhile little further support can be expected from exports.At the same time there is increasingly positive news ongovernment finances. Tax revenues in January and Feb-ruary exceeded the plan and a budget deficit below 3% ofGDP for 2012 now appears realistic even without addi-tional consolidation measures. After tapping the interna-tional financial markets with a USD 1bn eurobond issuein February, the State Treasury now has deposits of aboutEUR 1.8bn with the Bank of Latvia – more than enoughto cover the financing needs of the country well into2013 even under adverse financial market conditions.Regarding Latvia’s potential to fulfil the Maastricht crite-ria the spotlight is back on inflation. After recent oil price Inflation moderating only graduallydevelopments we have adjusted our inflation forecast for2012 upwards by 0.5% point. With parts of the Eurozone in recession the inflation criterion cannot be ex-pected to rise much, as the effect of global price trends inthe criterion countries is likely to be dampened by con-tracting domestic demand. Thus, if oil prices keep rising,the only realistic option for the government might be tobring down indirect taxes, lowering for example the VATrate by 1% point. This, however, would increase the riskof not meeting the budget deficit criterion.Andris Strazdsandris.strazds@nordea.com + 371 6 7096 096Latvia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (LVLmn) 2009 2010 2011 2012E 2013EPrivate consumption 10,049 -22.6 0.4 4.4 2.5 5.0Government consumption 3,224 -9.4 -9.7 1.3 -1.0 1.0Gross fixed capital formation 4,770 -37.4 -12.2 24.9 4.5 8.0Exports 6,931 -14.1 11.5 12.3 1.5 5.5Imports 9,141 -33.3 11.5 18.8 1.8 6.0GDP -17.7 -0.3 5.5 2.0 5.0Nominal GDP (LVLmn) 16,085 13,070 12,739 14,161 14,850 16,070Unemployment rate, % 17.1 18.7 15.5 14.5 12.8Consumer prices, % y/y 3.6 -1.0 4.4 3.0 3.2Current account, % of GDP 8.6 3.0 -1.2 -1.0 -1.5General government budget balance, % of GDP -9.7 -7.7 -5.5 -2.5 -2.027 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 27. ■ LithuaniaNo double-dip recession – just a soft landingAfter rapid expansion in 2011 Lithuanian economic Shift from exports to domestic economygrowth is decelerating, shifting from export-oriented todomestically-oriented sectors with private consumptionand investment acting as key growth drivers. The highlypro-cyclical and predominantly domestically-orientedconstruction sector became the fastest growing sector in2011 (19.2%), indicating that the domestic growth enginehas already started to work at full throttle.Export growth is slowing down, but will neverthelessremain in positive territory owing to the benign econom-ic outlook for Lithuania’s main trading partners. As a re-sult, the Lithuanian manufacturing sector, which sells68% of its output abroad, should also avoid outright con-traction. Improving business sentiment in the manufac- Improving business sentimentturing sector also suggests that production levels shouldnot shrink substantially in the near future.The deteriorating economic outlook prompted the Lithu-anian parliament to approve additional austerity measuresof LTL 1bn (0.9% of GDP) at end-2011. This reflectsstrong political commitment to pursue budget consolida-tion in spite of the parliamentary elections in October2012. Moreover, the improving macroeconomic outlook,successful issuance of 10-year eurobonds for USD 1.5bn(6.75%) and better-than-expected tax revenue data sug-gest that there will be no need to introduce extra austeritymeasures in order to reach the projected 2012 budget def-icit of below 3% of GDP. Public finances under controlIn line with expectations, the bankruptcy of Snoras Bank,Lithuania’s fifth largest bank by assets, did not have amajor negative impact on the Lithuanian economy andthe banking sector at large. Nevertheless, the worse-than-expected recession in the Euro zone and rising energyprices remain major risks for the Lithuanian economy.The former may hamper Lithuanian export growth whilethe latter could adversely affect consumer confidence andundermine private consumption growth.Žygimantas Mauricaszygimantas.mauricas@nordea.com + 370 5 2657 198Lithuania: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (LTLmn) 2009 2010 2011 2012E 2013EPrivate consumption 73,674 -17.5 -4.9 6.1 2.5 4.3Government consumption 21,505 -1.4 -3.3 0.4 -1.0 2.4Gross fixed capital formation 28,370 -39.5 1.0 17.1 6.6 7.5Exports 66,752 -12.5 17.4 13.7 2.8 6.5Imports 79,978 -28.3 17.3 12.7 3.5 7.0GDP -14.8 1.4 5.9 2.7 4.0Nominal GDP (LTLmn) 112,083 91,913 95,074 106,006 112,470 121,240Unemployment rate, % 13.7 17.8 16.0 14.0 12.5Consumer prices, % y/y 4.2 1.3 4.1 3.4 3.8Current account, % of GDP 2.6 1.3 -1.4 -2.3 -2.5General government budget balance, % of GDP -9.5 -7.1 -4.9 -2.7 -2.428 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 28. ■ ChinaEmphasis on stable growth Slowdown proceeding in line with expectations and Party Secretary very likely to be the current Vice President Xi Jinping. Cautious monetary policy easing expected … … but fiscal policy to remain fairly tight An external risk factor is a drop in global demand if the world economy plunges into a new and prolonged reces- Towards a more volatile CNY sion, which would severely hit Chinese exports. Domes- tic short-term risks are mainly related to the propertyGrowth still slowing but stabilisation in sight market, which is currently experiencing a slowdown,The Chinese economy is in a period of decelerating with sales, construction investment and prices easing.growth as for example infrastructure investment, indus- However, also this is strictly government-led, and so fartrial production, exports and the property market are the authorities seem content with the slowdown. The aimslowing. The cooling in growth is blessed by the gov- is to lower house prices and shift production from high-ernment, though, as the authorities focus on keeping a lid end housing to more affordable properties. This wouldon inflation and house prices. Nevertheless, as inflation help ease the housing shortage among the lower-incomehas slowed, we see the government supporting growth segments, which are increasingly in need of housing asenough to keep it comfortably above its target of 7.5% the urbanisation process continues. Thus, the governmentthis year, and we expect the economy to gradually gain continues to support its social housing projects, while re-some momentum in the second half of the year. Hence, strictions on the commercial housing sector are unlikelywe see GDP expanding by 8-8.5% in both 2012 and to be lifted in the short term.2013. The authorities’ current priority seems to be topromote stable long-term growth rather than boost short- Slowing inflation enables looser monetary policyterm activity through stimulus measures. Inflation has eased significantly since the peak last sum- mer on moderating food prices. Inflation is expected toThe current focus on inflation rather than growth indi- remain roughly in line with the 4% target this year, al-cates that although abundant means to stimulate the though some upward pressure can be expected as for in-economy are still available both on the fiscal and mone- stance food prices and rising wages support inflation.tary side, we expect the authorities to take a cautious Nevertheless, the slowdown in inflation opens up roomstance, unless growth threatens to weaken significantly. for further monetary policy easing. We expect to see re-The recent budget showed no signs of significant stimu- serve requirement cuts during the spring on top of thelus spending on the fiscal side, while monetary policy is two already undertaken in order to support lending activi-being very gradually loosened, and only through reserve ty. However, the cautious approach taken so far withrequirement cuts. Compared to earlier, we thus believe monetary policy is expected to continue as the authoritiesgrowth will remain subdued over the next few years. want to avoid accelerating inflation and creating a credit boom this time around. This also rules out interest rateA new Party Secretary, National People’s Congress, Cen- cuts, unless the economy threatens to slow down moretral Committee and Politburo Standing Committee will than anticipated. With interest rates still below the pre-be put in place in late 2012, and a new President and crisis levels of 2008 and inflation unlikely to deceleratePremier announced in March 2013. Although the upcom- much further, the room for rate cuts remains limited.ing leadership change could be an excellent opportunityto implement structural reforms, it is likely to be a period New lending began this year at a slow pace, reachingwhen stability and predictability are valued over change. about 18% of total projected lending for the whole yearThus, no significant reforms are expected before the fifth in January and February, against the usual over 20%. Thegeneration of leaders is in place, with the next President cut in reserve requirements in late February should, how-China: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (CNYbn) 2009 2010 2011 2012E 2013EPrivate consumption 11,059 9.1 5.9 9.2 9.5 10.0Government consumption 4,175 9.0 12.9 9.8 9.5 9.0Fixed investment 12,808 22.0 11.9 10.2 8.6 9.0Stockbuilding* 1,024 -0.7 0.3 0.0 0.0 0.0Exports 10,990 -4.2 20.3 10.0 9.0 8.5Imports 8,567 4.5 20.7 10.7 12.0 11.0GDP 9.2 10.4 9.3 8.0 8.3Nominal GDP (CNYbn) 31,490 34,632 39,431 45,227 50,655 56,986Unemployment rate, % 4.3 4.1 4.1 4.1 4.1Consumer prices, % y/y -0.7 3.3 5.4 3.8 4.2Current account, % of GDP 5.2 5.1 2.7 3.0 2.5General government budget balance, % of GDP -2.3 -1.6 -2.2 -1.9 -2.0* Contribution to GDP growth (% points)29 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 29. ■ Chinaever, support lending going forward. The lending target GDP growth stabilisingfor the whole year, CNY 8trn, is only slightly above lastyear’s level, and hence no huge policy easing is expectedin 2012. Still, credit will change from being a factorslowing growth to a factor boosting growth this year.Long-term challenges keep the authorities busyOne of the main long-term goals in the current 5-yearplan is more balanced growth, shifting the emphasis frominvestments to private consumption. Private consumptionmakes up a very modest 35% of GDP, compared to egIndia’s 57%. However, it is generally easier to boost pub-lic investment than private consumption as improve-ments in eg social security, education and health caretake longer to filter through to growth. Improving social Growth to remain comfortably above targetswelfare nevertheless remains on the agenda and is alsolinked to some problems related to the urbanisation pro-cess, such as providing health care and education in thecities for migrant worker families. Upcoming challengesare also the imminent decline in the working-age popula-tion and the rising dependency ratio, which are largelyresults of the one-child policy. This also raises questionsabout the possibility of bottlenecks in the manufacturingsector and a lack of especially a skilled workforce.Public debt currently seems manageable despite the hugeoff-balance sheet debt accumulated during the stimuluspackage in 2008, but the fiscal position of local govern-ments is tight. Falling land prices have put a furtherstrain on local finances, and for instance new property Inflation still on a slowing trendtaxes could be introduced. The huge investments underthe fiscal package were largely made by local authorities,financed by loans from state-owned banks. Recent re-ports have suggested that banks have been encouraged toextend the maturities of these loans, and a significant partof this debt is still likely to be bad. China has earliermanaged to transfer bad debt from banks to the govern-ment, and as all public debt is held by residents, no con-ventional debt crisis seems likely. The debt problems arean internal issue within the Chinese public sector.CNY strengthening taking a breatherThe CNY has stabilised this year with increasing specu-lation about the future appreciation path. As inflation hasslowed and growth weakened, the argument for a further More modest CNY strengthening aheadstrengthening has grown weaker. Chinese officials seethe CNY close to its equilibrium value, and indeed thestrengthening has been significant since 2005. In realtrade-weighted terms, the exchange rate is at historicallystrong levels. Widening the fluctuation band for the CNYagainst the USD from currently +/-0.5% seems like alikely step forward. This would increase the CNY’s vola-tility, but also advance the planned exchange rate reform.Overall, we still see strengthening potential for the CNYlater during the year, but at an increasingly modest paceand with more volatility in the short term.Annika Lindbladannika.lindblad@nordea.com +358 9 165 5994030 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 30. ■ IndiaSlowly regaining momentumGrowth in 2011 turned out weaker than anticipated as In- Weak domestic economy weighed on growthdia was hit by both weaker global demand and a coolingdomestic economy. Private consumption faltered morethan expected last year, and investment contracted duringthe second half of the year, dragged down by both cycli-cal and structural issues. There is light at the end of thetunnel, though. After a weak first quarter we expectgrowth to gradually gain traction. Monetary policy is alsoturning from a drag to a supportive factor for economicactivity. The improving picture is also supported by forinstance the recovery in manufacturing sector confidenceas well as industrial production.The room for fiscal stimulus remains limited as public fi-nances are in chronically bad shape, which supports our Industrial production recovering from the slumpview of only modest growth this year. Although the INRhas reversed some of last year’s sharp weakening, therelatively weak exchange rate continues to put a strain onpublic finances through higher import prices, especiallycausing the energy subsidising bill to increase, on top ofthe recent surge in oil prices. With fiscal policy unable toaid growth properly, hope is with the central bank. Al-though moderating inflation supports expectations of fur-ther monetary easing, only the cash reserve requirementhas been cut so far. Despite the weakened growth out-look, the central bank is still heavily focused on inflationrisks, and thus the timing and amount of rate cuts willdepend on the inflation path. As the economy remainsfragile and inflation is relatively subdued, we expect ratecuts to start in the spring. Inflation rates below 5% are, Moderating inflation makes room for rate cutshowever, likely to be only temporary as upside pressureis exerted by for example domestic food prices.Going forward, it will be important to remove structuralimpediments to growth, which have especially hamperedinvestment through for instance sluggish government ap-proval of projects. In addition, liberalising energy pricesand service sector reforms are imperative. In the longerterm the Indian growth outlook remains, however, large-ly encouraging due to for example the favourable de-mographics and the large pool of labour.Annika Lindbladannika.lindblad@nordea.com +358 165 59940India: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (INRbn) 2009 2010 2011 2012E 2013E Private consumption 32,578 7.2 8.7 7.0 7.0 8.0 Government consumption 6,153 16.0 4.8 5.0 6.0 6.0 Fixed investment 18,211 7.7 7.2 5.0 8.2 9.0 Exports 13,110 -7.1 17.5 18.0 12.0 13.0 Imports 16,140 -2.1 9.1 14.0 12.0 12.0 GDP 8.2 9.6 6.8 6.7 7.8 Nominal GDP (INRbn) 56,301 64,574 76,741 89,262 100,131 112,851Wholesale prices, % y/y 2.4 9.6 9.5 5.5 5.0Current account, % of GDP -1.9 -3.1 -3.0 -2.5 -3.2General government budget balance, % of GDP -6.4 -4.8 -6.0 -5.5 -4.831 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 31. ■ BrazilCurrency war: vol. 2The Brazilian economy managed to recover, but growth The great decouplingremained barely above water in Q4. The significantstrengthening of the Brazilian real over the past twoyears has hit the industrial sector, causing a decouplingof the backbones of the Brazilian economy – retail salesand the manufacturing sector (chart on the right). Recentindicators suggest some stabilisation and we expect high-er growth in 2012, helped by fiscal and monetary easing.With its well-diversified exports, Brazil is partly protect-ed against external shocks, and Brazilian consumers willremain comfortable in the tight labour market.The central bank of Brazil unexpectedly rapidly switchedfrom monetary policy tightening to easing last year, cut-ting the benchmark SELIC rate from 12.5% to 9.75% Central bank in easing modecurrently in 50 bp steps and a larger 75 bp move inMarch. We expect one or two cuts in the coming monthsto finalise the easing cycle. While inflation has retreated,the tight labour market will not allow it to fall much andlonger-term inflation expectations have ticked up recent-ly. Hence, we believe the SELIC rate will remain on holdat high levels but will be raised again in 2013.Following a sharp weakening in BRL in August and Sep-tember last year, the central bank intervened to supportthe BRL. But the stabilisation and eventual appreciationin early 2012 made the bank again stick to the measuresagainst BRL strengthening. The latter is not least due tothe weakness in the industrial sector, but also the expan-sive monetary policy from the world’s major central BRL supported by commodities, but very volatilebanks. With Brazilian interest rates at among the highestlevels in EM, the BRL is very attractive for investors.Thus, the only way to stop the BRL from appreciating isto introduce non-market restrictions such as taxes onportfolio inflows, which Brazil will likely continue to in-troduce. So, even though the higher commodity priceswill support BRL, the gains will be capped and introduc-tion of new measures will keep the BRL volatile.Aurelija Augulytėaurelija.augulyte@nordea.com +45 3333 6437Brazil: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (BRLbn) 2009 2010 2011E 2012E 2013EPrivate consumption 1,786.8 4.2 7.0 4.5 4.2 5.0Government consumption 612.1 3.9 4.0 2.4 3.2 3.0Gross fixed capital formation 579.5 -10.4 22.0 5.5 5.8 6.8Exports 414.3 -10.3 11.5 4.5 5.5 7.0Imports 408.5 -11.5 36.3 9.5 7.5 7.2GDP -0.7 7.6 2.8 3.5 4.5Nominal GDP (BRLbn) 3,031.9 3,257.1 3,721.5 4,080.1 4,468.8 4,933.9Unemployment rate, % 8.1 6.7 6.0 6.3 6.0Consumer prices, % y/y 4.9 5.0 6.4 5.6 5.4Current account, % of GDP -1.5 -2.3 -2.6 -2.5 -2.3General government budget balance, % of GDP -3.2 -2.7 -2.4 -2.0 -1.8* Contribution to GDP growth (% points)32 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 32. ■ OilOil prices stay high as buffer remains uncomfortably lowOil prices are expected to remain high over the forecast Oil price forecasts Brent – baseline (USD/barrel)period as the EU/US sanctions and oil embargo targeting Q1 Q2 Q3 Q4 YearIran’s oil exports and economy will continue to be a bull- 2011 106 115 112 110 111ish factor for oil prices through a tightening of oil fun- 2012E 118 123 126 127 124damentals and elevated geopolitical risk. Indicators of 2013E 127 128 129 130 129economic growth and oil demand growth have movedhigher, while liquidity-boosting measures from the OPEC spare capacity falls to uncomfortable levelsworld’s most powerful central banks increase appetite forrisk assets, including oil prices.Income growth, economic activity and population growthare vital drivers of oil demand. The health of the globaleconomy and high oil prices are expected to weigh on oildemand growth in the first part of the forecast period. Inthe second part of the period we expect oil demand willpick up momentum as world economic growth improves.Debt problems in the EU, the US and Japan will dent oildemand growth in the OECD region despite Japan’ssharp increase in crude burn to compensate for the loss ofnuclear power after the earthquake last year. Healthygrowth in oil demand from emerging economies and in- Oil prices in USD and EURcreasing demand for strategic stockpiling are expected tooffset the fall in oil demand from the OECD region. Highand increasing oil prices could jeopardise the economicrecovery. The economic impact of higher oil prices dif-fers depending on the nature of the price increase, the oilintensity and import dependence of the economy. Oil in-tensity has declined markedly since the oil shocks in the1970s as oil efficiency and conservation have improvedin many large oil-consuming countries. Transportation isexpected to be the main driver of global oil use, account-ing for around 52% of total oil demand.2012 looks set to become a much less comfortable yearfor global oil supply growth than previously thought. TheEU/US sanctions and oil embargo targeting Iran’s oil ex- US shale oil production sharply up in medium termports are already having an impact on oil sales from theworld’s third-largest oil exporter. Expectations for oilsupply growth from non-OPEC countries in 2012 havebeen lowered substantially due to various supply disrup-tions, while the project pipeline for 2013 looks weakerdue to lack of investments during the global recession. Atechnological breakthrough in the US has made US shaleoil production profitable. Incremental shale volumes areexpected to make a significant difference to global sup-ply in the medium term. Almost all growth in non-OPECsupply is expected to come from the Americas over theforecast period. The lion’s share of OPEC capacity ex-pansions is expected from Iraq in the medium term, whileexpansions over the forecast period remain modest.Bjørnar Tonhaugenbjornar.tonhaugen@nordea.com +47 2248 7959Thina M. Saltvedtthina.margrethe.saltvedt@nordea.com +47 2248 799333 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 33. ■ MetalsMetal prices to trend higher as global demand reboundsBase metals prices have recovered from the recent lows Base metal price forecasts (USD per tonne)of late 2011 in tandem with the rising odds that the 2012E 2013Eworld would escape another recession. Nevertheless, Aluminium 2,375 2,500the broad base metals index is lower now than at the Copper 8,525 8,700 Nickel 20,375 21,000time of our previous issue of Economic Outlook in Au- Zinc 2,100 2,300gust. Global industrial production growth is stabilising Source: Nordea Marketsand forward-looking global indicators point to an im-provement in global metals demand growth. We be- Base metals price rebound to continuelieve metals demand will return to more normal growthlevels, albeit at a slightly slower pace than in the pre-crisis years. Supply growth is also expected to pick upfor most base metals, which, if realised, will limit priceincreases. Even so, we see higher average prices in thecoming two years.Aluminium prices are still low compared to operatingcosts, which have risen 30% over the past two years.We expect demand growth to pick up from last year’smoderate levels led by China and other Emerging Mar-kets, while we expect demand in Europe to stay weak.Global output is struggling with poor profitabilitywhile capacity growth is heavily dependent on China, Copper and aluminium – robust fundamentalsIndia and the Middle East with the bulk of the expan-sion expected in 2013. We expect aluminium prices torealign with industry cost levels over the forecast peri-od.The copper market is heading for the third consecutiveyear of deficit in 2012 as demand is expected to re-bound and supply is expected to struggle. However, theoutlook for supply looks better on paper over the fore-cast period than in a long time, but supply has chroni-cally disappointed projections. Disruptions and delaysare expected, especially for new projects, and we there-fore expect a sustained deficit and elevated copperprices to trigger demand curtailment and substitution toother materials. Nickel and zinc – short-term oversupplyNickel has underperformed this year on expectations ofsteady supply additions. The market balance is ex-pected to show a larger surplus this year as new pro-jects gradually come on steam. Judging from historicaldata, risks to these supply projections seem to be most-ly on the downside. Demand will grow modestly, butnot enough to outweigh supply expansions, leading toinventory build-ups and range-bound prices.The zinc market will remain in surplus this year, asproduction grows robustly, while demand remainssluggish. From 2013, the market looks set for increas-ing tightness as several large mines reach the end oftheir life, in addition to a global decline in ore headgrades. We expect zinc prices to underperform thisyear but to rise steadily in the medium term to realignwith the industry’s long-term incentive prices.Bjørnar Tonhaugenbjornar.tonhaugen@nordea.com +47 2248 795934 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 34. ■ Special themeRisks to our baseline scenarioOverall, our baseline scenario remains that of a sluggish long-term fiscal plan. And without such a plan the USglobal recovery, where the world economy will continue will probably face the prospect of more rating down-to recover from the 2008-2009 recession at a moderate grades of US Treasuries. As seen after the first down-pace, returning to trend growth rates amid persistent un- grade in August last year, such an outcome would likelyemployment and budget deficits in developed markets. trigger a wave of risk aversion in financial markets with negative spill-overs to the real economy.While central banks’ massive liquidity allocation to thefinancial system has certainly softened the downside Turning to the Euro area we estimate that the tighteningrisks to the global economy, downside risks to the out- of fiscal policy will subtract just above 1% point fromlook do, however, still remain. growth in the Euro area as a whole in both 2012 and 2013. However, there is still a risk that Italy and SpainKey downside risks to our baseline scenario include: may be forced to adopt even tighter fiscal policies if Excessive fiscal tightening weak economic growth leads to an overshoot of previ- Political risks ously announced budget deficit targets. Escalation of political tensions in the Middle East Hard landing in China Political risks Our baseline scenario is also surrounded by considerableOn the other hand, the possibility of positive surprises political risks. It should not be forgotten that the sharpshould definitely not be ignored. Key upside risks in- improvement in financial market sentiment over recentclude: months coincided with technocrat Mario Monti taking Virtuous cycle with release of pent-up demand from over as prime minister of Italy and Mariano Rajoy win- households and companies ning a clear majority in the Spanish elections at the end Economic policy to the rescue of November. So politics could turn much less benign in the months ahead:Overall, we consider the upside and downside risks toour economic outlook as roughly balanced.  The French presidential elections are likely to lead to the election of Socialist Francois Hollande, whoExcessive fiscal tightening has pledged to renegotiate the “Fiscal Compact”In the US, policy dysfunction remains very high and a agreed at the EU summit on 9 December.key concern is how Congress and the President will beable to deal with the around USD 600bn in expiring fis-  The Spanish government is arguing for an upwardscal easing measures at the end of this year. revision to the deficit target of 4.4% of GDP for 2012, after revising last year’s budget deficit fromAt the turn of the year the so-called Bush tax cuts, the 6% to 8% of GDP.payrolls tax cut, the extended unemployment benefits andother programmes are all set to expire. At the same time,  The political consensus behind Mario Monti coulddue to the failure of the Super Committee to reach still collapse. Parliamentary elections have to be heldagreement USD 150bn in across-the-board spending cuts by June 2013, and Monti has already declared thatalso kick in. Furthermore, the federal debt ceiling will he wants to return to university life after that.likely have to be raised again in early 2013. Oil the new Greece?But because of the already hostile political climate in In our view, further escalation of political tensions in theWashington and a likely very ugly election campaign Middle East involving a temporary shut-in of 50% ofprior to the November elections there is significant risk Saudi oil production could temporarily push Brent oilthat policy makers will be unable to agree on anything in prices to USD 250 per barrel. In this quite realistic riska timely manner. Although there is a clear political incen- scenario the average 2012 oil price is seen to be aroundtive to compromise to prevent massive fiscal tightening USD 140 or 33% higher than assumed in our baselinein the order of 4½% of GDP from kicking in next year, scenario. See our oil risk scenario page 37.the mere uncertainty about future policy changes couldtrigger a more negative reaction in private-sector demand Based on standard multipliers this should subtract aboutlater this year than assumed in our baseline scenario. 0.3% point from GDP growth in both the US and the Eu- ro area in 2012, which is not enough to jeopardise theBut even if most or all of the otherwise expiring fiscal global recovery. However, these multipliers are based oneasing measures are eventually extended into 2013, the historical correlations where oil prices were much lowereconomy might still underperform compared to our base- than today. Moreover, given the still weak state of theline scenario if politicians fail to come up with a credible global economy such a spike in oil prices could well lead35 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 35. ■ Special themeto a sharper downturn than suggested by standard multi- Large companies are cash-rich, which means they havepliers. the ability to accelerate hiring and investments if they deem it appropriate. In addition, after years of holdingEspecially European countries are likely to be more af- back on purchases of durable goods and services duringfected this time because most economies are already the recession and sluggish recovery, households may bestagnant or shrinking. Worse, Europe’s weakest periph- feeling the need to catch up on some of these purchases.eral economies are also some of the biggest net importersof energy. Thus, a virtuous cycle, where stronger hiring increases income and fuels confidence and consumer spending,Thus, a further supply-side driven surge in oil prices which in turn feeds back to stronger profits, couldcould fracture confidence of financial markets and per- emerge sooner than assumed in our baseline scenario.haps spell the end of the global recovery. While such a This would obviously imply positive spill-overs to globalshock would imply a near-term lift to inflation, the likely growth and risk sentiment in financial markets.subsequent rise in unemployment would probably spurdiscussion of more monetary easing at that time. In this scenario, the Fed could start tightening policy as early as in the beginning of 2013, assuming no downsideChina’s housing bubble deflating or bursting? risks to global growth materialise. Economic policy to the rescue Another upside risk is that the ECB’s recent substantial liquidity allocation might have a better-than-anticipated impact on bank lending and overall credit conditions, es- pecially when the European banks have raised their core Tier 1 capital ratios to 9% by end-June. On the fiscal front, European politicians might make a swifter move to fiscal integration. In particular, a swift expansion of Euro-area rescue funds could provide fur- ther certainty to financial markets, resulting in a further narrowing of yield spreads between Germany and the pe- ripheral member states.Hard landing in ChinaThe Chinese economy has already slowed significantly – The US Congress could also support the economic re-from almost 12% annual growth at the beginning of 2010 covery by reducing uncertainty about fiscal policy. Thus,to the expected around 8% on average in 2012. The au- a clear plan for the debt ceiling and the expiring easingthorities have focussed on cooling the overheated hous- measures as well as a strategy to restore long-run fiscaling market and combatting inflation rather than support- sustainability could boost confidence, leading to strong-ing the economy and thus accepted the slowdown. er-than-expected growth.Key concerns at this point are: Johnny Bo Jakobsen Policy is kept too tight, causing the housing bubble johnny.jakobsen@nordea.com +45 3333 6178 to burst and prompting a much sharper-than- anticipated slowdown in the economy. Anders Matzen anders.matzen@nordea.com +45 3333 3318 Pressure on the housing market prevents new stimu- lus to the economy in case foreign growth slows more than expected.Policy concerns are exacerbated by the ongoing leader-ship change in the Communist Party. Indeed, the nextleader, Xi Jinping, must do nothing wrong until he is of-ficially elected during autumn, while the current leader-ship is likely to lose power as its term is nearing its end.In case the Chinese economy will face a hard landing thismight have a strong impact on oil prices, see page 37.Virtuous cycleOn the other hand, the possibility that we are currentlyunderestimating the strength of the US economic recov-ery should not be overlooked.36 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 36. ■ OilArab spring hits Saudi Arabia/Iran. Chinese bubble burstsIn the high-price scenario, elevating protests and political Oil price Brent - price scenariosturbulence in the oil-rich Eastern provinces of SaudiArabia are expected to spread to the rest of the Kingdom.We assume the unrest will trigger a political uprising inline with the Arab spring last year. As a consequence halfof Saudi Arabia’s production and spare capacity is as-sumed to be locked in and cut the Kingdom’s productionby 4mb/d. To compensate for the lost barrels from SaudiArabia, other OPEC members and Russia are expected tostep up production. We expect a net production loss of2.3 mb/d or 2.6% of global oil demand. The short-termeffect of the supply disturbance is projected to push oilprices up by 100% to USD 250/barrel. The severe supplydisruptions will call for an IEA SPR release to cover theremaining 2.3 mb/d. We expect oil prices to fall sharply Oil production in Iran and Saudi Arabia from 2007after the price spike as high oil prices will weigh notablyon world economic growth and curb oil demand.Domestic economic pressure on Iran is exacerbating asthe US and EU sanctions/embargo are eating into thecountry’s oil exports. A sharp fall in Iran’s income final-ly triggers a new wave of opposition against the regime.We assume that political turbulence will shut in Iran’s oilproduction by 50% to 1.8 mb/d. Saudi Arabia is expectedto cover half of the shut in production within days. Theshort-term effect will leave Iran’s supply short of 0.9mb/d or 1% of global oil demand. The remaining lostbarrels will gradually be covered by Saudi Arabia as theKingdom continues to ramp up production. The potentialprice spike from the supply disruption and reduced Saudi Oil consumption in China from 2000Arabian spare capacity is estimated at 40%, pushing oilprices up to USD 170/barrel.In the low-price scenario we assume a dramatic slow-down in the Chinese economy with significant growthramifications for the Asia/Pacific region as a whole.There is a risk that the government-led clampdown onthe Chinese property market could spiral out of control.We assume Chinese GDP growth falls to 3% this year todepression-like levels by Chinese standards, while theAsia/Pacific region experiences growth at 2%. Chineseoil demand is projected to fall by 180k while oil demandin developing Asia is expected to drop by 750k b/d. Anisolated demand loss of 0.8% of global oil consumptionis estimated to result in 30% lower oil prices, bottomingat USD 85/barrel in Q4. Swift cuts in OPEC productionas oil prices fall below the cartel’s unofficial target priceat USD 100/barrel will result in a gradual improvementin the oil balance and steadily rising prices back to esti-mated marginal cost levels over the course of 2013.Bjørnar Tonhaugenbjornar.tonhaugen@nordea.com +47 2248 7959Thina M. Saltvedtthina.margrethe.saltvedt@nordea.com +47 2248 799337 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 37. ■ Economic Research NordeaEconomic Research Nordea Denmark: Sweden: Helge J. Pedersen, Global Chief Economist Annika Winsth, Chief Economist Sweden helge.pedersen@nordea.com, tel. +45 3333 3126 annika.winsth@nordea.com, tel. +46 8 614 8608 Johnny Bo Jakobsen, Chief Analyst Torbjörn Isaksson, Chief Analyst johnny.jakobsen@nordea.com, tel. +45 3333 6178 torbjorn.isaksson@nordea.com, tel. +46 8 614 8859 Anders Matzen, Chief Analyst Andreas Jonsson, Senior Analyst anders.matzen@nordea.com, tel. +45 3333 3318 andreas.w.jonsson@nordea.com, +46 8 534 91088 Anders Svendsen, Chief Analyst Bengt Roström, Senior Analyst anders.svendsen@nordea.com, tel. +45 3333 3951 bengt.rostrom@nordea.com, tel. +46 8 614 8378 Jan Størup Nielsen, Senior Analyst Carolinne Bjerking, Junior Analyst jan.storup.nielsen@nordea.com, tel. +45 3333 3171 carolinne.bjerking@nordea.com, tel. +46 8614 8003 Bjarke Roed-Frederiksen, Analyst Linus Lauri, Assistant Analyst bjarke.roed-frederiksen@nordea.com, tel. +45 3333 5607 linus.lauri@nordea.com, tel. +46 8614 8003 Aurelija Augulyte, Analyst aurelija.augulyte@nordea.com, tel. +45 3333 6437 Estonia: Tönu Palm, Chief Analyst Thomas Gade, Assistant Analyst tonu.palm@nordea.com, tel. +372 628 3345 thomas.gade@nordea.com, tel. +45 3333 4007 Georg von Wowern, Assistant Analyst Latvia: georg.von.wowern@nordea.com, tel. +45 3333 6102 Andris Strazds, Senior Analyst andris.strazds@nordea.com, tel. +371 67 096 096 Lina Fransson, Assistant Analyst lina.fransson@nordea.com, tel. +45 3333 Lithuania: Zygimantas Mauricas, Analyst Finland: zygimantas.mauricas@nordea.com, +370 5 2657 198 Roger Wessman, Chief Economist Finland roger.wessman@nordea.com, tel. +358 9 165 59930 Russia: Pasi Sorjonen, Senior Analyst Dmitry A. Savchenko, Analyst pasi.sorjonen@nordea.com, tel. +358 9 1655 9942 dmitry.savchenko@nordea.ru, +7 495 777 34 77 4194 Annika Lindblad, Analyst annika.lindblad@nordea.com, tel. +358 9 1655 9940 Poland: Piotr Bujak, Chief Economist Poland Norway: piotr.bujak@nordea.com, +48 22 521 36 51 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 795938 EKONOMISKA UTSIKTER │MARS 2012 NORDEA MARKETS
  • 38. ■ Economic Research NordeaNordea 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 cur-rent 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 risksrelated 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 saleof 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 fu-ture results.Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.This document may not be reproduced, distributed or published for any purpose withoutthe prior written consent from Nordea Markets.Nordea, Markets DivisionNordea Bank Norge ASA Nordea AB (publ) Nordea Bank Finland Plc Nordea Bank Danmark A/S17 Middelthuns gt. 10 Hamngatan Aleksis Kiven katu 9, Helsinki 3 StrandgadePO Box 1166 Sentrum SE-105 71 Stockholm FIN-00020 Nordea PO Box 850N-0107 Oslo +46 8 614 7000 +358 9 1651 DK-0900 Copenhagen C+47 2248 5000 +45 3333 3333