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Världsekonomin rider ut stormen

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  • 1. ■ Innehåll EKONOMISKA UTSIKTER MAJ 2011 Världsekonomin rider ut stormen Nordisk styrka ■ Nordens ekonomier går starkt. Goda offentliga finanser och bytesbalanser bidrar till fortsatt gynnsam tillväxt. Tillväxt trots åtstramning ■ Världsekonomin utvecklas väl trots att stigande råvarupriser driver upp inflationen och dämpar tillväxten. ÖVERSIKT 04 ÅTSTRAMNING SVERIGE 08 REKORDÅR PÅ ARBETSMARKNADEN USA 16 STILL GROUND FOR OPTIMISM CHINA 29 GROWTH WILL SLOW DOWN AS AUTHORITIES FIGHT INFLATION OIL 32 POLITICAL RISK IN THE LIMELIGHT2 EKONOMISKA UTSIKTER│MAJ 2011 NORDEA MARKETS
  • 2. ■ InnehållTabellsamling ÖVERSIKT Åtstramning ................................................................................................. 4Nyckeltal ................................. 6Räntor och valutor ............... 7 Norden SVERIGE Rekordår på arbetsmarknaden ...................................................................... 8 NORWAYRedaktör Strong growth and higher inflation equal higher interest rates ...................... 10Annika WinsthChefekonom DENMARK Moving forward in tough terrain ................................................................... 12annika.winsth@nordea.comTel +46 8 614 8608 FINLAND Brisk rise continues ..................................................................................... 14 Större industriländerGått till tryck USA13 Maj 2011 Still grounds for optimism............................................................................ 16 EURO AREA High commodity prices to keep the ECB on rate hiking path.......................... 18 UKBesök oss på: Rebalancing at the expense of growth near term ........................................... 20www.nordea.se/analys JAPAN Catastrophe will have severe economic impact ............................................. 21Källor: Övriga länderReuters EcoWin och officiell natio- POLANDnell statistik om inget annat anges. Slowing just a bit ......................................................................................... 22 RUSSIA Two steps forward, one step back ................................................................ 24 ESTONIA Recovery spreading to the domestic economy.............................................. 26 LATVIA Recovery gradually gaining momentum ........................................................ 27 LITHUANIA Entering a new growth cycle ........................................................................ 28 CHINA Growth will slow down as authorities fight inflation ...................................... 29 INDIA Less bright economic outlook due to price pressure ..................................... 30 BRAZIL Balancing between excess inflation and ”hard landing” ................................ 31 Råvaror OIL Political risk in the limelight ......................................................................... 32 METALS Metal prices taking a breather at high levels ................................................. 333 EKONOMISKA UTSIKTER│MAJ 2011 NORDEA MARKETS
  • 3. ■ ÖversiktÅtstramning• Höga råvarupriser ett orosmoment Metallpriserna har drivits upp av en stark efterfrågan från främst tillväxtländerna och priserna väntas ligga kvar på• Inflationsfokus får centralbanker att höja räntan en hög nivå ytterligare en tid. En mer dämpad global till-• Svensk ekonomi mot högkonjunktur växt under prognosperioden bromsar dock prisutveck- lingen något. Ett antal ledande konjunkturindikatorer harÅterhämtningen av den globala konjunkturen har fått allt redan börjat falla tillbaka och på lite sikt väntas en svaga-bättre fotfäste. Marknaden har bytt fokus från skuldpro- re efterfrågan få allt större effekt på prisbilden, men ock-blematik till inflationsrisker även om oron för Grekland så på riskaptiten.åter har blossat upp. Vi räknar med en relativt god globaltillväxt strax under 4 procent i år och något över 4 pro- Tillväxtländerna drivercent nästa år. Prognosperioden präglas emellertid av åt- Tillväxtländerna är en fortsatt viktig motor även om Bra-stramning för att minska risken för överhettning och för silien och Indien väntas växa lite långsammare framöver.att inflationen biter sig fast. Åtstramning sker även via För Kina har vi däremot reviderat upp BNP-tillväxtenfinanspolitiken i skuldsatta länder, men också på grund något för innevarande år. Hög tillväxt har bidragit till enav höga råvarupriser som dämpar tillväxtmöjligheterna. allt större oro för inflationen. De kinesiska myndigheter-Flera länder kan behöva dra i handbromsen mer kraft- na väntas därför fortsätta sina ansträngningar att delsfullt, medan andra länder kan tvingas att strama åt i ett bromsa inflationsimpulserna, dels att åstadkomma en meralltför tidigt skede. balanserad tillväxt. Centralbanken väntas höja räntan yt- terligare några gånger under sommaren och vi räknarBNP, procentuell förändring årstakt med att den kinesiska valutan renminbin stärks gradvis. 2009 2010 2011E 2012E Tillväxten stannar därmed strax under 9 procent 2012,Världen -1.0 4.4 3.7 4.1USA -2.6 2.9 2.7 3.0 medan inflation väntas nå en topp på 6 procent i sommar.Euroområdet -4.0 1.7 1.9 1.8Japan -6.3 3.9 -0.1 2.9 USA överraskar positivtKina 9.2 10.3 9.2 8.8 250 250 Index, 2000=100 Index, 2000=100Höga råvarupriser en global risk 225 Tillväxt- 225Stigande råvarupriser utgör en global risk då vi har sett länder 200 200en bred prisuppgång en längre tid. En central fråga blir 175 175därmed om prisuppgången är av en mer tillfällig karaktär Totalteller om den fortsätter. Risken att höga råvarupriser på 150 150lite sikt ger stigande inflationsförväntningar är påtaglig, 125 125vilket inte är populärt bland centralbanker. Industrialiserade 100 länder 100Krisen i MENA-regionen 1 är svårbedömd, men den revo- 75 75lutionsrörelse som har påbörjats kommer sannolikt att 00 01 02 03 04 05 06 07 08 09 10 11fortgå en längre tid. Sedan förra rapporten har vi därför Källa: Nordea Markets och Reuters Ecowinreviderat upp prognosen för oljepriset till 120 dollar perfat för Brent i slutet av 2012. Det höga oljepriset dämpar USA back on trackden globala tillväxten. Avgörande för hur stor effekten En svag inledning på året och höga råvarupriser har bi-blir beror dock till vilken grad användarna hinner anpas- dragit till att vi reviderat ned vår tillväxtprognos försa sig till prisutvecklingen. Vår bedömning är att den USA. Ekonomin är dock tillbaka på spåret och den svagaglobala ekonomin kan hantera ett gradvis stigande pris- inledningen berodde delvis på en sträng vinter. Vi räknartryck relativt väl, men att riskerna för större effekter på med en tillväxt på knappt 3 procent under innevarande årkonjunkturen blir mer påtagliga vid hastiga prisföränd- och på 3 procent nästa år. Ökad utlåning till företagenringar. En betydande risk ur det perspektivet är hur Sau- och en något lägre produktivitet gör att sysselsättningendiarabien agerar som är en av världens största exportörer, tar bättre fart under prognosperioden.men också ett land som sitter på stora oljereserver. Vårthuvudscenario är att Saudiarabien förblir stabilt. Skulle Företagen blir en viktig drivkraft, men då hushållssektornoron sprida sig räknar vi med ett klart högre oljepris än står för en stor del av efterfrågan i USA måste även devad som ligger i vår prognos, men också med en risk- vara med på vagnen. Här utgör fallande bostadspriseraversion på finansmarknaderna. fortfarande en risk, men en relativt hög sparkvot gör att hushållen klarar av en mindre prisnedgång. Höga råvaru- priser vägs upp av sänkta skatter och konsumtionen vän- tas därmed stiga runt 3 procent.1 Nordafrika och Mellanöstern4 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 4. ■ ÖversiktHittills har Fed tonat ned inflationsrisken, men vår pro- Sverige på väg mot högkonjunkturgnos pekar på att inflationen ligger över målet under pro- Svensk ekonomi är stark och tillväxten sker på bredgnosperioden. En hög inflationsrisk talar för att Fed inle- front. Samtidigt står det klart att resursläget blir mer an-der räntehöjningscykeln i slutet av innevarande år. Då fi- strängt. Redan i slutet av förra året var BNP tillbaka pånanspolitiken inte stramas åt nämnvärt fram till presi- nivån före krisen, medan sysselsättningen nådde förkris-dentvalet, trots budgetunderskott, får penningpolitiken nivån i början av innevarande år. Sysselsättningen väntasstå för åtstramningen. Fed väntas därmed höja räntan till fortsätta att ge styrkebesked och slå rekord i år både vad3,50 procent i slutet av prognosperioden. Fed går därmed gäller nivån på antal sysselsatta personer och ökningstak-betydligt snabbare fram än ECB vilket ger en tydlig dol- ten.larförstärkning ner mot 1,25 mot euron i slutet av 2012. Resursutnyttjandet och arbetsmarknadens funktionssättTillväxt trots skuldproblematik i euroområdet hamnar därmed i fokus - inte minst med tanke på att viTillväxten har överraskat positivt i euroområdet och vi står inför en stor avtalsrörelse i höst som involverar 3,5reviderar därmed upp den något till 1,9 procent i år. miljoner löntagare. Vi är optimistiska om svensk tillväxt,Skuldproblematiken kvarstår men i första hand är det de men mer pessimistiska om arbetsmarknadens funktions-perifera länderna som behöver strama åt. Det dämpar sätt. Det finns tecken på att den strukturella arbetslöshe-tillväxten med 0,8 procentenheter i år och med 0,5 pro- ten har ökat. Trots historiskt hög arbetslöshet har företa-centenheter nästa år. Skillnaderna mellan länderna är gen allt svårare att hitta personal med önskad kompetens.dock fortsatt stora där Tyskland går starkt och gynnas av Det gör att vi räknar med högre löneutveckling än Riks-global efterfrågan. banken.Vidtagna åtgärder har stärkt euroområdets möjligheter att Det finns gott om skäl för Riksbanken att höja reporäntanhantera skuldproblem i utsatta länder. Det går givetvis i närtid till 2,50 procent i slutet av innevarande år och tillinte att utesluta eventuella bakslag, men de blir relativt 3,50 procent mot slutet av prognosperioden. Runt årsskif-kortvariga och det är mycket osannolikt att eurosamarbe- tet väntas Riksbanken dock gå in i en lugnare räntehöj-tet bryter samman. Det är därmed centralt att skilja på ningsfas, dels på grund av en något mer dämpad globalstruktur, där flera länder står inför stora utmaningar länge tillväxt, dels på grund av att räntehöjningarna biter alltän, och på konjunktur där omvärlden ger god draghjälp hårdare på hushållen. Aviserade regelförändringar förunder prognosperioden. den finansiella sektorn har bidragit till högre bostadsrän- tor och på lite sikt behöver Riksbanken ta hänsyn till det.Konjunkturellt bedömer vi att den största risken är högaråvarupriser och inte minst ett högt oljepris. Det är också Hushållssektorn är en viktig pusselbit ur flera aspekter.ett bekymmer för ECB. En inflationstakt över målet och Vi räknar med en mycket god utveckling av hushållensstigande inflationsförväntningar fick ECB att höja styr- disponibla inkomster och därmed med en stark konsum-räntan i våras. För att undvika att inflationen biter sig fast tion samt stigande sparkvot. Å andra sidan är det svårt attpå en för hög nivå och därmed påverkar kommande av- bedöma hur räntekänsliga hushållen är. Skuldsättningentalsförhandlingar höjer ECB räntan igen redan i juli. När ligger på en historiskt hög nivå och det är fortfarandestyrräntan når 2,25 procent i början av nästa år tar ECB många hushåll som lånar med korta bindningstider. Sti-sedan en paus. gande energipriser och fokus på skuldsättningen har re- dan nu satt avtryck i detaljhandeln. Kredittillväxten däm-BNP, procentuell förändring årstakt pas i takt med att Riksbanken höjer räntan och samtidigtDanmark 2009 -5.2 2010 2.1 2011E 2.0 2012E 1.8 sker en stabilisering av bostadspriserna. En risk är dockFinland -8.2 3.1 3.7 3.0 att hushållen reagerar mer kraftfullt på räntehöjningarnaNorge, fastlandet -1.3 2.2 3.3 3.1 och att vi därmed får en mer tydlig sättning i konsumtio-Sverige -5.3 5.5 4.7 2.3 nen och på bostadsmarknaden.Norden lyser starkt Exporten har gynnats av en växande global handel. ÄvenDe nordiska länderna fortsätter att sticka ut. I Norge och investeringarna väntas bidra starkt till tillväxten. Det drö-Sverige är fokus allt mer inställt på högkonjunktur och jer dock innan investeringarna är tillbaka på den nivåcentralbankerna har inlett räntehöjningscykeln. Vi räknar som gällde före krisen. Tillsammans med en god kon-med en högre inflationstakt i Norge än vad Norges Bank sumtionsökning ger det en BNP-tillväxt på 4,7 procent igör och därmed med en högre ränta samt en förstärkning år. Nästa år väntas tillväxten dämpas från mycket högaav norska kronan mot euron. Finland och Danmark ligger tillväxttakter och landa på 2,3 procent.en bit efter konjunkturellt och har behov av att strama åtde offentliga finanserna framöver. Danmark har val se-nast i november i år och sannolikt kan det få viss effekt Annika Winsth annika.winsth@nordea.com +46 8 614 8608på finanspolitiken. Finsk ekonomi drivs av både inhemskoch extern efterfrågan, där Finlands viktigaste export-marknader går starkt.5 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 5. ■ ÖversiktGrowth, % Inflation, % 2008 2009 2010 2011E 2012E 2008 2009 2010 2011E 2012EWorld1) 2.2 -1.0 4.4 3.7 4.1 World 4.6 0.7 2.6 3.7 2.7BIG-32) -0.1 -3.7 2.6 2.0 2.5 BIG-3 3.3 -0.2 1.3 2.5 1.7USA 0.0 -2.6 2.9 2.7 3.0 USA 3.8 -0.3 1.6 3.0 2.0Japan -1.2 -6.3 3.9 -0.1 2.9 Japan 1.4 -0.7 -0.1 0.4Euro area 0.3 -4.0 1.7 1.9 1.8 Euro area 3.3 0.3 1.6 2.8 1.8Germany 0.7 -4.7 3.5 2.8 2.2 Germany 2.8 0.3 1.2 2.5 1.7France 0.1 -2.5 1.5 1.8 1.9 France 3.2 0.1 1.7 2.7 1.8Italy -1.3 -5.1 1.2 1.4 1.4 Italy 3.5 0.6 1.6 2.8 2.1Spain 0.9 -3.7 -0.1 0.8 1.8 Spain 4.2 -0.3 2.0 3.4 1.8Netherlands 1.9 -3.9 1.8 2.0 2.1 Netherlands 2.2 1.0 0.9 2.3 1.6Belgium 1.0 -2.8 2.1 2.0 1.9 Belgium 4.5 0.0 2.3 3.3 1.6Austria 2.2 -3.4 2.1 2.0 1.9 Austria 3.2 0.4 1.7 2.9 2.0Portugal 0.0 -2.6 1.3 -1.5 -0.5 Portugal 2.7 -0.9 1.4 3.0 1.6Greece 2.0 -2.3 -4.3 -3.0 1.0 Greece 4.3 1.3 4.7 2.4 1.0Finland 0.9 -8.2 3.1 3.7 3.0 Finland 4.1 0.0 1.2 3.5 2.5Ireland -3.5 -7.6 -1.0 0.8 2.2 Ireland 3.1 -1.7 -1.6 1.5 1.0UK -0.1 -4.9 1.3 1.5 2.2 UK 3.6 2.2 3.2 4.1 2.0Denmark -1.1 -5.2 2.1 2.0 1.8 Denmark 3.4 1.3 2.3 2.7 2.0Sweden -0.6 -5.3 5.5 4.7 2.3 Sweden 3.4 -0.5 1.2 3.2 3.0Norway 1.8 -1.3 2.2 3.3 3.1 Norway 3.8 2.1 2.5 1.8 2.2Russia 5.6 -7.9 4.1 5.4 5.7 Russia 14.1 11.7 6.9 8.5 7.5Poland 5.1 1.7 3.8 3.7 4.0 Poland 4.4 3.8 2.7 3.8 1.9Estonia -5.1 -13.9 3.0 5.7 3.8 Estonia 10.6 -0.1 3.0 5.0 2.9Latvia -4.2 -18.0 -0.1 3.6 4.2 Latvia 15.3 3.6 -1.0 4.5 3.0Lithuania 2.9 -14.7 1.3 4.6 4.0 Lithuania 11.1 4.2 1.3 4.4 3.5Hungary 0.6 -6.5 0.9 3.2 3.4 Hungary 6.0 4.2 4.9 2.8 3.0Czech Republic 2.3 -4.0 2.5 3.1 3.8 Czech Republic 6.3 1.0 1.5 2.7 2.3Turkey 0.7 -4.7 7.5 5.1 5.5 Turkey 10.4 6.3 8.6 6.0 5.5China 9.6 9.2 10.3 9.2 8.8 China 5.9 -0.7 3.3 5.4 4.0India 4.9 9.1 9.7 7.9 8.1 India 8.7 2.1 9.5 7.5 5.0Brazil 5.2 -0.7 7.6 4.5 4.7 Brazil 5.7 4.9 5.0 6.4 5.2Public finances, % of GDP Current account, % of GDP 2008 2009 2010 2011E 2012E 2008 2009 2010 2011E 2012EBIG-32) -3.3 -8.4 -7.7 -7.4 -5.8 BIG-32) - - - - -USA -4.7 -10.4 -8.7 -8.8 -6.8 USA -4.7 -2.7 -3.2 -3.5 -3.7Japan -2.1 -7.1 -7.7 -10.0 -8.0 Japan 3.2 2.8 3.6 2.6 2.9Euro area -2.0 -6.3 -6.3 -4.6 -3.6 Euro area -1.5 -0.6 -0.6 -0.7 -1.0Germany 0.1 -3.0 -3.3 -2.5 -1.5 Germany 6.7 5.0 5.7 5.2 5.0France -3.3 -7.5 -7.0 -6.2 -4.8 France -2.7 -2.9 -2.1 -2.3 -1.9Italy -2.7 -5.4 -4.6 -4.0 -3.2 Italy -3.4 -3.2 -3.3 -3.3 -2.7UK -5.0 -11.3 -10.5 -8.0 -6.0 UK -1.6 -1.7 -2.5 -2.0 -1.5Finland 4.2 -2.6 -2.4 -1.2 -0.3 Finland 3.5 3.0 3.1 2.9 3.1Denmark 3.2 -2.7 -2.7 -3.8 -3.0 Denmark 2.7 3.6 5.4 5.9 5.4Sweden 2.2 -0.9 -0.3 1.0 1.7 Sweden 8.9 6.8 6.2 5.6 5.8Norway 19.1 10.5 10.1 14.6 15.8 Norway 17.7 13.1 12.9 16.8 17.2Russia 4.1 -5.3 -4.2 -1.5 -1.0 Russia 6.2 3.9 4.7 4.3 3.5Poland -3.7 -7.3 -7.9 -6.0 -4.5 Poland -4.8 -2.1 -3.4 -4.7 -4.2Estonia -2.8 -1.7 0.1 -0.7 -2.7 Estonia -8.8 4.5 3.8 0.9 -0.1Latvia -4.2 -10.2 -7.7 -4.8 -2.6 Latvia -13.1 8.6 4.0 -0.2 -1.0Lithuania -3.3 -9.2 -7.1 -5.0 -2.8 Lithuania -13.1 4.3 1.8 -1.0 -1.5Hungary -3.7 -4.4 -3.8 -2.9 -3.0 Hungary -7.3 -0.5 2.2 -0.5 -2.0Czech Republic -2.7 -5.8 -5.1 -4.5 -3.5 Czech Republic -0.6 -1.0 -2.5 -2.9 -3.5Turkey -1.8 -5.5 -5.2 -4.5 -4.0 Turkey -5.8 -2.3 -5.6 -6.0 -6.0China -0.4 -2.1 -1.6 -2.2 -1.9 China 9.6 5.9 5.2 4.1 3.6India -6.0 -6.5 -5.0 -5.5 -5.0 India -2.5 -2.0 -3.1 -2.5 -2.5Brazil -1.6 -3.2 -2.7 -2.5 -2.0 Brazil -1.8 -1.5 -2.5 -3.0 -2.81) Weighted average of countries in this table. Accounts for 70.5% of world GDP. Weights calculated using PPP adjusted GDP levels for 2007 according to the IMFs World Economic Outlook2) US, Japan and the Euro area6 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 6. ■ ÖversiktMonetary policy rates Monetary policy rate spreads vs Euro area 12.5.11 3M 6M 12M 24M 12.5.11 3M 6M 12M 24MUS 0.25 0.25 0.25 1.25 3.50 US -1.00 -1.25 -1.50 -1.00 1.25 1Japan 0.10 0.10 0.10 0.10 0.50 Japan -0.15 -0.15 -0.15 -1.15 -3.00Euro area 1.25 1.50 1.75 2.25 2.25 Euro area - - - - -Denmark 1.30 1.55 1.80 2.30 2.50 Denmark 0.05 0.05 0.05 0.05 0.25Sweden 1.75 2.00 2.50 2.75 3.50 Sweden 0.50 0.50 0.75 0.50 1.25Norway 2.00 2.50 2.75 3.25 4.50 Norway 0.75 1.00 1.00 1.00 2.25UK 0.50 0.50 0.50 1.00 2.25 UK -0.75 -1.00 -1.25 -1.25 0.00Switzerland 0.25 0.25 0.50 1.00 2.00 Switzerland -1.00 -1.25 -1.25 -1.25 -0.25Poland 4.00 4.25 4.50 5.00 5.00 Poland 2.75 2.75 2.75 2.75 2.75Czech Rep. 0.75 0.75 1.00 1.50 2.25 Czech Rep. -0.50 -0.75 -0.75 -0.75 0.00Hungary 6.00 6.00 6.00 5.50 5.25 Hungary 4.75 4.50 4.25 3.25 3.00Turkey 6.25 6.75 7.25 8.25 8.75 Turkey 5.00 5.25 5.50 6.00 6.50Russia 8.00 8.25 8.50 9.00 9.00 Russia 6.75 6.75 6.75 6.75 6.50China 6.31 6.81 6.81 6.81 6.81 China 5.06 5.31 5.06 4.56 4.56India 7.25 8.00 8.00 8.00 8.00 India 6.00 6.50 6.25 5.75 5.75Brazil 12.00 12.75 13.00 13.00 9.00 Brazil 10.75 11.25 11.25 10.75 6.75 1) Spread vs US3-month rates 3-month spreads vs Euro area 12.5.11 3M 6M 12M 24M 12.5.11 3M 6M 12M 24MUS 0.26 0.50 0.60 1.60 3.85 US -1.16 -1.35 -1.50 -0.90 1.35Euro area 1.42 1.85 2.10 2.50 2.50 Euro area - - - - -Denmark 1.45 2.00 2.30 2.70 2.90 Denmark 0.03 0.15 0.20 0.20 0.40Sweden 2.46 2.70 2.95 3.45 3.75 Sweden 1.04 0.85 0.85 0.95 1.25Norway 2.64 2.91 3.10 3.69 4.94 Norway 1.22 1.06 1.00 1.19 2.44UK 0.82 0.80 0.90 1.45 2.35 UK -0.60 -1.05 -1.20 -1.05 -0.15Poland 4.42 4.50 4.75 5.25 5.25 Poland 3.00 2.65 2.65 2.75 2.75Czech Republic 1.22 1.25 1.40 1.80 2.50 Czech Republic -0.20 -0.60 -0.70 -0.70 0.00Hungary 6.10 6.25 6.25 5.75 5.50 Hungary 4.68 4.40 4.15 3.25 3.00Russia 4.06 4.30 4.55 5.00 6.00 Russia 2.64 2.45 2.45 2.50 3.50Latvia 0.79 0.90 1.00 1.50 2.00 Latvia -0.63 -0.95 -1.10 -1.00 -0.50Lithuania 1.66 1.80 2.00 2.20 2.30 Lithuania 0.24 -0.05 -0.10 -0.30 -0.2010-year government benchmark yields 10-year yield spreads vs Euro area 12.5.11 3M 6M 12M 24M 12.5.11 3M 6M 12M 24MUS 3.18 3.65 3.75 3.90 4.35 US 0.08 0.05 0.05 0.15 0.60Euro area 3.10 3.60 3.70 3.75 3.75 Euro area - - - - -Denmark 3.11 3.65 3.80 3.90 4.00 Denmark 0.01 0.05 0.10 0.15 0.25Sweden 3.04 3.50 3.80 3.95 4.05 Sweden -0.05 -0.10 0.10 0.20 0.30Norway 3.46 3.92 4.10 4.33 4.75 Norway 0.36 0.32 0.40 0.58 1.00UK 3.38 3.70 3.75 3.80 4.05 UK 0.28 0.10 0.05 0.05 0.30Poland 6.05 6.00 5.80 5.70 5.60 Poland 2.96 2.40 2.10 1.95 1.85Czech Rep. 3.76 3.80 3.90 4.00 4.25 Czech Rep. 0.67 0.20 0.20 0.25 0.50Hungary 7.03 7.25 7.50 7.75 8.00 Hungary 3.93 3.65 3.80 4.00 4.25Exchange rates vs EUR Exchange rates vs USD 12.5.11 3M 6M 12M 24M 12.5.11 3M 6M 12M 24MEUR/USD 1.430 1.45 1.35 1.30 1.25 -EUR/JPY 116.2 122 116 120 123 USD/JPY 81.21 84.0 86.0 92.0 98EUR/DKK 7.456 7.46 7.46 7.46 7.46 USD/DKK 5.212 5.14 5.52 5.73 5.96EUR/SEK 8.976 8.75 8.75 9.00 9.20 USD/SEK 6.275 6.03 6.48 6.92 7.36EUR/NOK 7.813 7.80 7.80 7.80 7.60 USD/NOK 5.462 5.38 5.78 6.00 6.08EUR/GBP 0.870 0.87 0.88 0.84 0.83 GBP/USD 1.645 1.67 1.53 1.55 1.51EUR/CHF 1.265 1.30 1.30 1.35 1.37 USD/CHF 0.884 0.90 0.96 1.04 1.10EUR/PLN 3.894 3.90 3.80 3.70 3.60 USD/PLN 2.723 2.7 2.8 2.8 2.9EUR/CZK 24.24 24.3 24.0 23.5 23.0 USD/CZK 16.95 16.7 17.8 18.1 18.4EUR/HUF 264.4 265 270 275 270 USD/HUF 184.8 183 200 212 216EUR/TRY 2.26 2.15 2.10 2.00 2.00 USD/TRY 1.58 1.50 1.47 1.40 1.40EUR/RUB 39.66 37.1 35.1 33.7 32.9 USD/RUB 27.72 25.6 26.0 25.9 26.3EUR/LVL 0.709 0.71 0.71 0.71 0.71 USD/LVL 0.496 0.49 0.52 0.54 0.56EUR/LTL 3.453 3.45 3.45 3.45 3.45 USD/LTL 2.414 2.38 2.56 2.66 2.76EUR/CNY 9.288 9.32 8.56 8.00 7.24 USD/CNY 6.493 6.43 6.34 6.15 5.79EUR/INR 63.92 65.3 60.8 57.9 55.0 USD/INR 44.69 45.0 45.0 44.5 44.0EUR/BRL 2.310 2.25 2.23 2.08 1.88 USD/BRL 1.615 1.55 1.65 1.60 1.507 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 7. ■ SverigeRekordår på arbetsmarknaden• BNP-tillväxten dämpas från höga nivåer skenande statsskulder har den globala handeln återhämtat sig efter finanskrisen, vilket svenska exportföretag har• Resursutnyttjande högre än normalt redan i år dragit nytta av. Det är framför allt expansionen i de sk• Reporäntan når 2,50 procent i år tillväxtländerna som ligger bakom återhämtningen. No- terbart är att svenska företags direkta utbyte med tillväxt-Hjulen snurrar allt snabbare länderna har ökat. På senare tid har den sammanlagdaDen svenska ekonomin fortsätter att utvecklas väl. Både exporten av varor till de sk BRIC-länderna till och medexporten och den inhemska efterfrågan ökar i god takt överstigit exporten till USA, vilken under lång tid harsamtidigt som sysselsättningen slår rekord i både nivå tillhört de absolut viktigaste exportmarknaderna. Indika-och tillväxt. De offentliga finanserna visar överskott, torerna och utvecklingen i omvärlden tyder på att expor-trots att ytterligare reformer väntas nästa år. ten fortsätter att öka, även om tillväxten på avsättnings- marknaderna dämpas framför allt nästa år.Efter en stark inledning av 2011 dämpas dock tillväxten.Det beror på att det kraftiga uppstudset från de nedtryck- Arbetsmarknad motvikt till ökade kostnaderta produktionsnivåerna efter finanskrisen är över samti- Hushållen har drabbats av kraftiga kostnadsökningar un-digt som den ekonomiska politiken blir mindre expansiv. der det senaste halvåret. Framför allt har bolåneräntornaBolåneräntorna har stigit och det mer än förväntat. Fi- stigit. Utöver Riksbankens räntehöjningar har även regel-nanspolitiken är neutral i år till skillnad från fjolårets ex- förändringar för den finansiella sektorn samt ökat utbudpansiva inriktning. Dessutom har kronan stärkts, vilket av bostadsobligationer bidragit till högre bolåneräntor.dämpar exportföretagens vinster och därmed även aktie- Elpriserna var också mycket höga under vintern samti-kurserna. digt som drivmedelspriserna har stigit till rekordnivåer.Nästa år stimuleras ekonomin av skattesänkningar och Framför allt har den snabba uppgången av bolåneräntor-andra reformer på sammanlagt 30 miljarder kronor me- na medfört en åtstramning som har kommit tidigare ändan fortsatta räntehöjningar och flaskhalsar på arbets- väntat. Hushållen förefaller ha reagerat på de ökade kost-marknaden verkar i den andra riktningen. Dämpning av naderna. Kredittillväxten har planat ut och detaljhandelnsBNP-tillväxten sker dock från mycket höga nivåer. Trots försäljning har varit svag de senaste månaderna. Även pånedväxlingen bedöms tillväxten ligga över den potentiel- bostadsmarknaden, som i regel har stor påverkan på hus-la och långsiktiga utvecklingen under prognosperioden. hållens konsumtions- och sparbeteende, syns tecken påDärmed stiger resursutnyttjandet, som redan i år ligger inbromsning. Arbetsmarknaden fortsätter dock att ut-över det normala, ytterligare. vecklas gynnsamt, vilket bidrar till att inkomsterna ökar och framtidstron stärks. Trots höjda räntor och dyrareExporten viktig drivkraft energi ökar hushållens reala disponibla inkomster medEfterfrågan på svenska exportvaror har ökat kraftigt un- drygt 3 procent både 2011 och 2012. Därmed är förut-der det senaste året. Trots att många länder brottas med sättningarna på plats för en god konsumtionsutvecklingSverige: Makroekonomiska nyckeltal (årlig tillväxt i procent om inget annat anges) 2007 (mdr. SEK) 2008 2009 2010 2011E 2012EPrivat konsumtion 1,460 0.0 -0.4 3.5 2.8 2.5Offentlig konsumtion 797 1.0 1.7 2.6 2.8 0.4Fasta bruttoinvesteringar 612 1.4 -16.3 6.3 10.0 5.8 - industri 95 -0.2 -22.2 -7.5 12.1 8.6 - bostadsinvesteringar 121 -13.1 -23.3 16.0 17.2 7.7Lagerinvesteringar* 23 -0.5 -1.5 2.1 0.2 -0.4Export 1,621 1.7 -13.4 10.7 9.1 5.7Import 1,388 3.5 -13.7 12.7 8.9 5.8BNP -0.6 -5.3 5.5 4.7 2.3BNP, kalenderkorrigerad -0.9 -5.2 5.3 4.8 2.7Nominell BNP (mdr SEK) 3,126 3,204 3,089 3,301 3,500 3,657Arbetslöshet (% av arbetskraften) 6.2 8.3 8.4 7.3 6.8Sysselsättning 1.1 -2.1 1.0 2.7 1.1Konsumentpriser (årsgenomsnitt KPI) 3.4 -0.5 1.2 3.2 3.0Underliggande inflation (årsgenomsnitt KPIF) 2.7 1.7 2.0 1.7 1.9Timlöner (nationalräkenskaper) 4.6 3.0 0.9 3.6 4.2Bytesbalans (mdr SEK) 284 209 205 196 213 - % av BNP 8.9 6.8 6.2 5.6 5.8Handelsbalans (% av BNP) 3.6 3.2 2.4 2.2 2.5Offentligt finansiellt sparande (mdr SEK) 71 -29 -11 35 63- % av BNP 2.2 -0.9 -0.3 1.0 1.7Offentlig bruttoskuld, % av BNP 38.8 42.8 39.8 36.0 32.6* Bidrag till BNP-utvecklingen, procentenheter8 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 8. ■ Sverigeframöver. Vår prognos innebär att sparkvoten stiger Exporten ökar snabbtkommande år, vilket motiveras av en stabilare förmögen- 150 Index 2000=100 Mdkr 350hetsutveckling efter de senaste årens snabba uppgång. 140 325 Global handel,Den stigande sparkvoten indikerar dock att konsumtio- 130 industriländer 300nen kan öka mer än prognosen. 120 275 110 250Snabbt ökande sysselsättning 100 225Den höga tillväxten har satt tydliga avtryck på arbets- 90 200marknaden. Antalet sysselsatta har ökat snabbt under de 80 Svensk export av 175sex senaste kvartalen. Den kraftiga uppgången innebär att 70 varor per kvartal, 150 sa, högerredan i början av 2011 var rekordmånga sysselsatta. 60 125 Prognos 100Mycket tyder på en stark utveckling på arbetsmarknaden 50 94 96 98 00 02 04 06 08 10 12under större delen av 2011, vilket innebär att antalet sys-selsatta ökar med hela 2,7 procent i år. Även det är en re- Källa: Nordea Markets och Reuters Ecowinkordnotering. Nästa år sker dock en nedväxling i linje Stort konsumtionsutrymme trots högre räntormed en lugnare produktionsutveckling. 6 % y/y 15 % av disp. inkomst RealaUtbudet av arbetskraft har också ökat kraftigt de senaste 5 inkomster Sparkvot, 13 högeråren. Bland annat har regeringens reformer bidragit till 4 Konsumtion 11att fler har sökt sig ut på arbetsmarknaden. Trots rekord-nivåer på sysselsättningen är arbetslösheten därför fortfa- 3 9rande högre än innan krisen. Det finns tecken som tyder 2 7på att den strukturella arbetslösheten har ökat och att det 1 5har blivit svårare för företag att hitta personal med rättkompetens. Tillsammans med kompensationskrav efter 0 3tidigare krisavtal och rekordhöga vinster i många bran- Prognos -1 1scher talar det stramare läget på arbetsmarknaden för att 02 03 04 05 06 07 08 09 10 11 12lönerna kommer att öka snabbare framöver. Vi räknar Källa: Nordea Markets and Reuters Ecowinmed att timlönerna stiger med över 4 procent 2012, vilketär något över det historiska genomsnittet de senaste 15 Antal sysselsatta på rekordnivåeråren på 3,7 procent. 4750 9.5 (000) personer % av arbetskraften 4700 9.0Även stigande inflationsförväntningar kan bidra till att 4650 8.5höja lönekraven inför höstens avtalsrörelse. Förväntning- Antal sysselsatta, sa 4600arna om högre priser speglar uppgången i råvarupriserna 8.0 4550 Arbetslöshet,och hushållens ökade kostnader för energi och boende. höger 7.5 4500Inflationen enligt KPI ligger också högt över 2- 7.0procentsmålet både i år och nästa år. Däremot ligger den 4450 6.5underliggande inflationen ännu under målet. Med ett sti- 4400gande resursutnyttjande, ökade lönekostnader och en sta- 4350 6.0 Prognosbilisering av importpriserna bedöms den underliggande 4300 5.5inflationen att stiga framöver. 01 02 03 04 05 06 07 08 09 10 11 12 Källa: Nordea Markets and Reuters EcowinHögre räntor och fortsatt kronstyrkaDet är således mycket som talar för att Riksbanken fort- Hög inflation och stigande inflationsförväntningarsätter på den inslagna vägen och höjer reporäntan fram- 3.3 % y/y % y/y 6över. Vi räknar med att reporäntan når 2,50 procent i slu- 3.1 5tet av 2011 och 3,50 procent på två års sikt. Även om 2.9 4 KPI, högertillväxten mattas är den makroekonomiska utvecklingen i 2.7 3Sverige stark jämfört med många andra länder under 2.5 2kommande år, vilket tillsammans med Riksbankens rän- 2.3 1tehöjningar ger kronan stöd. I den andra vågskålen ligger 2.1 0räntehöjningar i andra länder. Vi räknar med att kronan 1.9 5-åriga inflations- -1handlas mot dollarn till 6,92 och mot euron på 9,00 på ett förväntningar, 1.7 -2års sikt. Prospera 1.5 Prognos -3 96 98 00 02 04 06 08 10 12Torbjörn Isaksson Källa: Nordea Markets and Reuters Ecowintorbjorn.isaksson@nordea.com +46 8 614 88599 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 9. ■ NorwayStrong growth and higher inflation equal higher interest rates• Strong growth but no overheating However, during the forecast period interest rates will rise enough to probably halt home price growth and we• Inflation to rise more than Norges Bank expects eventually expect a downward correction.• Rates rising more than Norges Bank expects this year Residential construction has picked up slightly lately and• Strong NOK vs EUR, weaker import-weighted NOK with rising home prices we expect housing investment to accelerate further. We also expect corporate investmentDemand and production in the mainland economy look activity to revive after the past few years’ decline. Lowset to develop roughly as forecast in our January issue of interest rates, easier access to credits and benignEconomic Outlook. However, recent labour market economic prospects bode well for higher investmentfigures have been somewhat stronger than expected and activity. The increase will be curbed by a continued highit would appear that unemployment may decline more level of idle capacity, though.rapidly than previously assumed. Oil companies’ investment plans for 2011 show aUnderlying inflation has been lower than we expected significant increase in offshore investment in Norway.this year, but we have nonetheless only slightly We expect the good times for the supplier industry todowngraded our forecast of the average level in 2011. continue in 2012 as oil prices are likely to remain high.Definite signs have now emerged that the sharp uptick in Prospects for Norwegian exporters are also good thanksall commodity prices is translating into higher purchase to fairly strong growth in their key markets. But for someprices of finished products for retailers. So far this has companies the strong NOK and high cost growth willnot driven consumer prices higher, but we think this will hamper expansion opportunities.happen gradually. As we look for somewhat higherinflation going forward than Norges Bank has estimated, Strong demand growth but moderate wage growthwe expect interest rates to be hiked at a slightly faster Following some years with strong public stimulus,pace this year than the central bank has indicated so far. government consumption increased less than private con- sumption last year. The government has signalled thatStrong increase in consumer demand moderate public consumption growth must be expectedConsumption growth rose sharply last autumn, but seems also in the next few years. However, strong growth into have declined again in Q1 2011. This is probably a private demand will ensure good production growth intemporary lull caused by high electricity prices. But with the mainland economy. This will lead to solid employ-fairly strong growth in real wages and employment, we ment growth with a risk that the labour markets maythink consumption growth will accelerate again. Home tighten to a degree triggering renewed wage and costprices have increased significantly and we expect this growth. But strong growth in the working-agetrend to remain intact well into 2012. Low interest rates, population, well aided by high immigration, will ease thea favourable economic outlook and high labour pressure. We look for wage growth of 4 and 4 ¾% inimmigration point to strong growth in housing demand. 2011 and 2012.Norway: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (NOK bn) 2008 2009 2010 2011E 2012EPrivate consumption 940 1.6 0.2 3.6 3.3 3.0Government consumption 447 4.1 4.7 2.2 2.0 2.0Fixed investment 504 2.0 -7.4 -8.9 9.4 5.3 - gross investment, mainland 376 -1.4 -11.7 -4.4 7.9 4.5 - gross investment, oil 113 5.5 9.9 -18.8 15.0 8.0Stockbuilding* 33 -0.3 -2.6 3.3 -0.4 0.0Exports 1,040 1.0 -4.0 -1.3 1.3 1.5 - crude oil and natural gas 480 -2.0 -1.2 -6.5 -2.0 -0.6 - other goods 302 4.2 -8.2 5.0 3.0 4.3Imports 691 4.3 -11.4 8.7 5.2 3.7GDP 2,272 0.8 -1.4 0.4 2.2 2.3GDP, mainland 1,724 1.8 -1.3 2.2 3.3 3.1Unemployment rate, % 2.6 3.2 3.6 3.0 2.8Consumer prices, % y/y 3.8 2.1 2.5 1.8 2.2Core inflation, % y/y 2.6 2.6 1.4 1.4 2.3Annual wages (incl. pension costs), % y/y 6.3 4.2 3.6 4.0 4.7Current account (NOKbn) 449.1 311.8 322.1 471.3 515.2 - % of GDP 17.7 13.1 12.9 16.8 17.2Trade balance, % of GDP 19.1 14.8 13.7 16.8 17.2General govt budget balance (NOKbn) 480.4 249.6 253.5 410.0 475.0- % of GDP 19.1 10.5 10.1 14.6 15.8* Contribution to GDP growth (% points)10 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 10. ■ NorwayCosts passed through to consumers Spending on pause at the beginning of the yearAlthough we expect moderate growth in wage costs, 122 Index Index 122underlying inflation may rise quite sharply from the 121 121 120 120current low level. The strong growth in energy and 119 Trend, 119commodity prices now filters through to growth in prices Retail sales 4M mov. avg. 118 118at the producer/importer level for key products such and 117 117clothing and food. We think the growth trend will 116 116continue on the back of accelerating cost growth in low- 115 115cost countries such as China. 114 114 113 113So far growth in consumer prices has been surprisingly 112 112low considering retailers’ higher purchase costs. In times 111 111 07 08 09 10 11of weak spending growth, price competition intensifies toretain customers, and margins come under pressure. Source: Nordea Markets and Reuters EcowinHowever, we think it is only a question of time before Effect of stronger NOK on inflation will fadeconsumer prices go up. Relatively brisk consumption 2.0 12.5growth going forward will make it easier for retailers to % y/y % y/y 10.0hike prices during the year. 1.5 Import weighted NOK, 4M mov. avg., 7.5 1.0 advanced 6M, rhsHigher inflation equals higher interest rates 0.5 5.0Our growth outlook does not differ markedly from that of 2.5 0.0Norges Bank, but our forecast of underlying price growth 0.0this year is considerably higher. That is a key reason why -0.5 -2.5we expect the central bank to hike its policy rate more -1.0 Prices on -5.0rapidly than implied in its March interest rate forecast. -1.5 imported -7.5 goods,The presumed continued uptick in home prices also 4M mov. avg. -2.0 -10.0suggests that Norges Bank will hike interest rates at a 05 06 07 08 09 10 11more aggressive pace this year. Source: Nordea Markets and Reuters EcowinSince mid-February the NOK has firmed in terms of the Producer prices rising more than consumer pricesimport-weighted I44 exchange rate index, while the NOK 130 130 Index Price indices goods Indexhas been relatively stable versus the EUR. The import- Dec 2002=100 produced in Norway Dec 2002=100 125 125weighted strengthening reflects the fact that the NOK haslargely kept pace with the EUR during a period when the 120 Producer prices 120EUR has generally firmed sharply. We also expect the CPI-ATE * 115 115NOK to hold its own against the EUR going forward. AsNorges Bank according to our forecasts will hike interest 110 110rates more sharply than the ECB, we will occasionally 105 105see a stronger NOK versus the EUR. In import-weighted 100 100terms and versus currencies such as the GBP and theUSD, the NOK is expected to weaken as we consider the 95 *Average of agricultural and other goods 95current EUR strength to be temporary. 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters EcowinRisk of strong wage and price growthUnemployment has dropped quite steeply lately. Even if NOK is strong given rate differentialour growth forecast turns out to be accurate, a combina- 10.00 NOK % points 0.00tion of weaker productivity growth and lower labour 9.75 0.25immigration could lead to labour market tightening and a 9.50 0.50stronger-than-expected acceleration of wage growth. Bot- 9.25 EUR/NOK 0.75tlenecks in parts of the labour market could also result in 9.00 2Y swap spreadgenerally stronger wage growth. In such a scenario Nor- 8.75 vs Euro area, 1.00 reversed axis, rhsges Bank will hike its policy rate also faster than we ex- 8.50 1.25pect, and the NOK will occasionally be stronger than as- 8.25 1.50sumed in our forecasts. However, the NOK strengthening 8.00 1.75will limit the upturn in interest rates. 7.75 7.50 2.00 May Sep Jan May Sep Jan May Sep Jan MayErik Bruce 08 09 10 11 Source: Nordea Markets and Reuters Ecowinerik.bruce@nordea.com +47 2 248444911 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 11. ■ DenmarkMoving forward in tough terrain• Prospect of falling unemployment productivity gains has now been harvested. Therefore we expect productivity to fall back towards an annual growth• Productivity challenge remains rate of around 1% towards 2012. Once again, this• Inflation looms underscores the need to focus on generating the necessary productivity boost in coming years that is a• Housing market facing headwinds this year key prerequisite for the sustainability of the government’s 2020 plan.Growth in the Danish economy declined surprisingly inQ4. It was the first setback registered since the low in Inflation surprises on the upsidemid-2009. But a single negative quarter is not unusual Despite continued low capacity utilisation in the Danishand the latest indicators suggest a renewed upturn that is economy inflation looks set to come out closer to 3%expected to remain intact throughout the forecast period. than 2% in 2011. This is largely due to surging oil prices at the beginning of the year and expectations of persis-Labour market about to reverse tently high oil prices during the remainder of the yearDanish labour market indicators have surprised on the combined with a strengthening of the USD versus theupside over the past few months. Unemployment has DKK. In addition, the sharp postage rate hikes with ef-declined slightly, seasonally adjusted employment fect from April and the introduction of a new tax on satu-expectations in both the manufacturing industry and the rated fats in the autumn will contribute to the higher in-service sector are back in positive territory and the flation.number of job vacancies is trending higher. At the sametime we have seen a prolonged period of rising demand. Consumption under pressure, but hope in sightThis strongly suggests that private-sector employment Consumer spending has again come under pressure.has finally reversed. But employment in the public sector Following a sharp increase in disposable incomes inwill still be dominated by the ongoing budget 2010 on the back of substantial tax cuts, falling interestconsolidation. All in all, we expect employment to rates and rising real wages, trends in 2011 have reversed.increase moderately over the coming quarters, Notably rapidly growing inflation and very modestunemployment to edge lower and this favourable nominal wage increases have put households’ room fordevelopment to gather momentum towards the end of the manoeuvre under pressure. Moreover, consumers are stillyear and in 2012. very nervous about the outlook for the labour market and the housing market, and this coupled with significantBrief productivity boost political uncertainty puts a damper on their spending.Since growth recovered during 2009 the downward However, given the prospect of rising employment and aproductivity trend has been broken thanks to increased clarification of the political situation during the autumnadded value without a major intake of labour. However, at the latest (when a general election must be held), weour expectation of rising private-sector employment also expect 2011 to be a year with reasonable consumerimplies that most of the “low-hanging fruit” of spending levels and 2012 to be even better.Denmark: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (DKKbn) 2008 2009 2010 2011E 2012EPrivate consumption 820 -0.6 -4.5 2.2 1.8 1.9Government consumption 440 1.6 3.1 1.0 -0.3 0.5Fixed investment 371 -3.2 -14.3 -4.0 1.9 2.3 - government investment 32 0.8 4.6 7.3 11.5 -7.6 - residential investment 107 -10.9 -16.9 -9.4 3.4 3.8 - business fixed investment 233 -0.6 -15.3 -1.4 -0.7 4.0Stockbuilding* 25 -0.5 -1.4 0.6 0.3 0.0Exports 885 2.8 -9.7 3.6 5.0 4.4Imports 847 2.7 -12.5 2.9 4.4 4.5GDP -1.1 -5.2 2.1 2.0 1.8Nominal GDP (DKKbn) 1,695 1,741 1,656 1,746 1,783 1,869Unemployment rate, % 1.9 3.5 4.2 4.0 3.8Unemployment level, 000 persons 51.1 96.2 114.1 108.9 103.9Gross unemployment level, 000 persons 74.2 129.0 164.9 162.0 153.4Consumer prices, % y/y 3.4 1.3 2.3 2.7 2.0Hourly earnings, % y/y 4.5 2.9 2.5 2.0 2.5Nominal house prices, one-family, % y/y -4.5 -12.0 2.4 -1.0 1.0Current account (DKKbn) 46.2 59.0 94.8 105.0 100.0- % of GDP 2.7 3.6 5.4 5.9 5.4General govt. budget balance (DKKbn) 56.1 -45.0 -47.4 -68.0 -56.0- % of GDP 3.2 -2.7 -2.7 -3.8 -3.0* Contribution to GDP growth (% points)12 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 12. ■ DenmarkDanish companies more optimistic Spring is on its wayWhile consumers are still sitting on the fence, companies 3000 (000) persons (000) full-time 180have become more optimistic in recent months. Notably unemployed Employment 160sentiment in the manufacturing industry has shifted since 2900the turn of the year, especially driven by growing 140demand in Danish export markets. But with the 2800likelihood of more subdued growth momentum in 120Denmark’s key export markets in Sweden and Germany 2700 100in 2012, it is crucial for continued growth in the Danisheconomy that consumer spending regains momentum. 2600 80 Gross unemployment, rhsCentral bank ready to sanction new rate hikes 2500 60 03 04 05 06 07 08 09 10 11 12In early April the Danish central bank sanctioned the firsthikes of the lending rate and the discount rate since Source: Statistics Denmark, Nordea Markets and Reuters EcowinOctober 2008. The hike of 0.25% point came after asimilar hike from the ECB. We expect the Danish central Still major productivity challenges 6 6bank to mirror the ECB’s interest rate moves until end- % y/y Productivity % y/y2011, lifting the lending rate up to 1.80%. On a 2-year 4 4horizon we look for a lending rate of 2.50%, partly as a Historical avg.,result of the expected rate hikes in the Euro area and 2 1996-2010 2partly because we expect the Danish central bank to 0 0normalise the interest rate differential to the Euro area to0.25% point. -2 -2 4Q mov. avg.Housing market taking a breather this year -4 Note: Productivity is defined -4Housing prices are still lower than at the peak in 2007 as annual GVA growth per working hour in the private sector Forecast -6 -6and many homeowners have therefore bought their home 03 04 05 06 07 08 09 10 11 12at a higher price that they will be able to sell it for today. Source: Statistics Denmark, Nordea Markets and Reuters EcowinThis puts a damper on transaction activity, as many ofthe technically loss-making homeowners cannot or will Inflation on the risenot sell their home at a lower price than they paid for it. 5 5 % y/y Danish inflation % y/yStill, home sales rose in 2010 compared to 2009 sup- 4 4ported by low interest rates and fairly decent increases in Energy Fooddisposable incomes. But based on the trend in the num- 3 3ber of loan offers as well as net lending at the beginning 2 2of this year, it seems that home sales got off to a tentativestart to 2011. 1 1 0 0Despite an increase in long mortgage rates, housing af-fordability is still at roughly the same level as during the -1 -1 Otherhousing market boom in 2003-2005. And as the expected -2 -2increase in long rates is offset by modest income gains, 01 02 03 04 05 06 07 08 09 10 11 12housing affordability this year and next year will most Source: Statistics Denmark, Nordea Markets and Reuters Ecowinlikely remain at largely the same level as during theboom years. A family’s housing expenses the first time Dwellings worth less than when they were boughtthey are buying a house will therefore constitute the same 200 (000) Boligkøb (000) Boligkøb 200share of its income as then. Moreover, rising employ- 175 175ment will lend a helping hand to the housing market, but 150 150as employment growth will probably not accelerate until 125 125the end of this year and in 2012. We expect price de- Teknisk tabsgivende købclines this year to be followed by price increases next 100 100year. 75 75 50 50Troels Theill Eriksen 25 25troels.t.eriksen@nordea.com +45 3333 2448 0 0 06 07 08 09 10Jan Størup Nielsen Kilde: Realkreditforeningen, Nordea Markets og Reuters Ecowinjan.storup.nielsen@nordea.com +45 3333 317113 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 13. ■ FinlandBrisk rise continues• No slowdown in growth before 2012 raised with a good half a percentage point, mainly due to corrected historical statistics. Then again, the growth• Inflation weakens household purchasing power estimate for 2012 has been lowered to make it consistent• Increase in exports, investment and consumption with the weaker global growth outlook.• Public deficit will decrease markedly Strong rise in exports continues Goods exports will grow somewhat slower than last yearIn 2010 the Finnish economy recovered clearly faster during the forecast period. Service exports will take anthan most of the euro countries. Both total production upward turn after a couple of years decline andand total demand, measuring the general economic contribute to faster growth of total exports than in 2010.activity, increased 3.1% from last year. Growth Exports are estimated to increase across the board, as allaccelerated towards the year-end, and in Q4 total main industrial sectors have received a lot of new orders.production increased more than 5% from the previous The pick-up of investment demand indicates that exportyear. growth relies more heavily than last year on the manufacture of machinery and equipment as well as onThis years outlook remains good in Finland and rather the electro-technical industry.strong growth is expected to continue. A special benefitfor us is the fact that the economies of our most Restart of machinery and equipment investmentimportant export countries, Germany and Sweden, are There was only a slight improvement in investment lastgrowing exceptionally briskly. Rising crude oil prices year. Construction investment picked up clearly, asand the stronger rouble will boost Russias export residential construction returned briskly to its pre-income, adding to the countrys possibilities to increase recession peak levels. However, machinery andits imports, also from Finland. equipment investment only started rising in late 2010. During the forecast years, investment growth willWith regard to 2012, the outlook has, however, become accelerate markedly. Machinery and equipmentmore uncertain. The rising prices of oil and other investment will grow along with the rising industrialcommodities will increase corporate costs globally. In capacity utilisation rate. Growth in constructionaddition, consumer prices have risen faster than investment will wane somewhat. The level of residentialforecasted, improving the purchasing power of construction will stabilise and the growth rate decelerate,households less than expected. All this dampens the but non-residential construction will increase.growth outlook of both the world and Europe as well asFinland. Much higher inflation than expected In Q1 2011, consumer prices rose 3.2% compared to oneTotal production is estimated to increase 3.7% in 2011 year ago. This is much more than expected. Risingand 3% in 2012. Both years, growth is driven by foreign energy and commodity prices have lifted primarilytrade and domestic demand (consumption and housing, food and transport prices. The significance ofinvestment). The growth estimate for this year has beenFinland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (EURbn) 2008 2009 2010 2011E 2012EPrivate consumption 91 1.7 -2.1 2.6 2.6 2.3Government consumption 39 2.4 1.0 0.4 1.0 1.0Fixed investment 38 -0.4 -14.6 0.8 5.6 4.7Stockbuilding* 3 -0.8 -1.3 0.2 0.0 0.0Exports 82 6.3 -20.1 5.1 7.7 7.1Imports 73 6.5 -17.6 2.6 6.6 7.0GDP 0.9 -8.2 3.1 3.7 3.0Nominal GDP (EURbn) 179.7 184.6 171.2 180.3 190.3 200.6Unemployment rate, % 6.4 8.2 8.4 7.7 6.9Industrial production, % y/y -0.1 -19.9 5.4 6.0 5.0Consumer prices, % y/y 4.1 0.0 1.2 3.5 2.5Hourly wages, % y/y 5.6 4.0 2.6 2.7 3.0Current account (EURbn) 6.4 5.1 5.5 5.5 6.3 - % of GDP 3.5 3.0 3.1 2.9 3.1Trade balance (EURbn) 6.9 3.4 3.4 2.4 3.6 - % of GDP 3.7 2.0 1.9 1.3 1.8General govt budget balance (EURbn) 7.8 -4.5 -4.4 -2.3 -0.7- % of GDP 4.2 -2.6 -2.4 -1.2 -0.3Gross public debt (EURbn) 63.0 75.0 87.2 94.7 100.8- % of GDP 34.1 43.8 48.4 49.8 50.2* Contribution to GDP growth (% points)14 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 14. ■ Finlandthese sectors is high, as their share of the consumer price Value of exports in double digit growthindex is about 50%. It is likely that consumer price 40 % y/y % y/y 40growth will accelerate even more, as prices may not yet 30 World trade volume 30totally reflect the actual rise of commodity prices. The 20 20rising market rates start to gradually raise the costs of 10 10owner-occupied housing. In addition, the euro isexpected to weaken, which will add somewhat to the 0 0upward pressure on import prices. Consequently, -10 -10consumer prices are estimated to rise 3.5% in 2011 and -20 -202.5% in 2012. -30 -30 Finland, value of exportsImproving employment and smaller savings ratio -40 -40 98 99 00 01 02 03 04 05 06 07 08 09 10supporting private consumptionPrivate consumption surpassed the pre-recession peak in Source: Nordea Markets and Reuters EcowinQ4 2010. During the forecast period, consumptiongrowth will slow down, as the purchasing power of an Economic recovery strengthens employment 8 6average household will not improve much due to higher % y/y Finland, employment, 3 mth average (rhs) % y/y 6 4inflation. However, improved employment will enablehigher consumption as it increases the disposable income 4 2of the household sector. The unemployment rate is 2 0expected to decrease to around 7% on average in 2012. 0 -2We are also assuming that households will save a smaller -2 -4portion of their income than in the past two years when -4 -6the savings ratio was exceptionally high. The most rapid -6 -8growth will be seen within demand for durable goods. -8 Finland, GDP, 4 quarter avg (lhs) -10 -10 -12Public sector deficit to decrease markedly 98 99 00 01 02 03 04 05 06 07 08 09 10The fairly brisk economic growth will not be quite Source: Nordea Markets and Reuters Ecowinenough to generate a public financial surplus. The deficitis estimated to decrease to a little more than 1% of GDP Consumer confidence leads GDP expansionin 2011 and to a little less than 0.5% of GDP in 2012. 10.0 % y/y 25These figures give, however, too rosy an image, as the 7.5 20public finances include the pension system with its ample 5.0surplus. The central government finances will continue to 15 2.5have a clear deficit, and the government borrowing, in 0.0 10particular, will raise the public debt to more than 50% oftotal production. One of the most important tasks of the -2.5 5 Consumer confidence, rhsnew government will be to get the central government -5.0 0finances into shape, despite the fact that Finland already -7.5now clearly meets the requirements of the Stability and -5 -10.0 GDP, lhsGrowth Pact. At first, this may require public -12.5 -10expenditure cuts and tax increases. What is even more 98 99 00 01 02 03 04 05 06 07 08 09 10important, though, is to reinforce the ground for growth Source: Nordea Markets and Reuters Ecowinin the longer term. Without strong growth, it will be verypainful to finance the prospective growing public Inflation is much higher than expectedexpenditure, which will become due with the ageing 5.0 % y/y % y/y 5.0population. In practice, it is simply a question of how 4.0 4.0much we Finns will work during our lifetime and howproductive we are. 3.0 Euro area, HICP 3.0 2.0 2.0 1.0 1.0Pasi Sorjonenpasi.sorjonen@nordea.com +358 9 165 59942 0.0 0.0 Finland, CPI -1.0 -1.0 -2.0 -2.0 98 99 00 01 02 03 04 05 06 07 08 09 1015 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 15. ■ USAStill grounds for optimism• Soft patch in Q1, but upswing intact … All in all, we therefore believe that the upswing is still on track. But as growth in the first months of the year was• … despite high commodity prices weaker than estimated and oil prices are now expected to• Fiscal policy creating uncertainty remain at a higher level than assumed so far, we have made some adjustments to our growth forecast notably• Higher interest rates in sight for this year. Following GDP growth of 2.9% last year, we now look for an increase of 2.7% in 2011 and 3 % inThe outlook for the US economy in 2011 is still quite 2012. In our January issue of Economic Outlook the fore-bright, although the unexpectedly high commodity prices cast was 3.3% for both 2011 and 2012.contributed to a sharp downturn in growth in Q1. Aftersolid progress in GDP of 3.1% in Q4 2010, growth de- The increase in employment is projected to acceleratecelerated to 1.8% in Q1 this year. However, in our view slightly more during the forecast period in step with athis is a soft patch in the ongoing recovery: in addition to faster increase in banks’ corporate lending and a slow-the high commodity prices, activity was also held back down in the so far strong productivity growth. Unem-by the unusually harsh winter weather in the early ployment is therefore likely to be reduced to 8½% bymonths of the year. This alone points to a renewed upturn end-2011 and to just below 8% by end-2012.in activity as early as this quarter. Heavier underlying inflation pressureMoreover, in the coming quarters commodity prices are In early 2011 core inflation reversed and the now upwardnot expected to curb growth to the same extent as in Q1. trend is expected to remain intact, particularly driven byOne of the reasons is that the oil price spike is believed to higher rents and some spill-over effect from the higherbe nearly over. But more fundamentally, the economy commodity prices. The headline inflation rate, which isseems to be well bolstered against the high commodity forecast to peak at around 3½% in mid-2011, should re-prices owing to the temporary tax cuts this year, the now main above 2% throughout most of the forecast period.high household savings ratio and robust earnings growth Households’ purchasing power should therefore increaseparticularly among large companies. about 2½% this year and the next.Small companies are closer to the danger zone due to the Fiscal policy also source of uncertaintypressure on input prices. But so far they are still hiring at Fiscal policy has been given extra attention after Stan-a rapid pace supported by further easing of banks’ credit dard & Poor’s in April downgraded the AAA rating ofstandards also towards this segment. It is the small com- the US from stable to negative outlook. The reason citedpanies that account for the strongest job growth at the was a lack of strategy to bring public budgets back onmoment, which indicates that they will be able to with- track. However, the political debate seems to have shiftedstand the blow from the high commodity prices at least in in a more positive direction lately, as both parties now fi-the foreseeable future. nally want to reduce public debt long term. But there is still political strife on which means to employ to achieveUSA: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (USDbn) 2008 2009 2010 2011E 2012EPrivate consumption 9,806.3 -0.3 -1.2 1.7 3.1 3.0Government consumption and investment 2,674.3 2.8 1.6 1.0 -0.4 0.4Private fixed investment 2,266.1 -6.4 -18.3 3.9 5.1 6.1 - residential investment 628.6 -24.0 -22.9 -3.0 -2.8 4.3 - equipment and software 1,112.6 -2.4 -15.3 15.3 11.2 7.2 - non-residential structures 524.9 5.9 -20.4 -13.7 -4.8 3.2Stockbuilding* 29.1 -0.5 -0.6 1.4 -0.1 0.1Exports 1,661.7 6.0 -9.5 11.7 6.8 7.0Imports 2,375.7 -2.6 -13.8 12.6 4.2 6.0GDP 0.0 -2.6 2.9 2.7 3.0Nominal GDP (USDbn) 14,061.8 14,369.1 14,119.1 14,660.4 15,337.8 16,117.1Unemployment rate, % 5.8 9.3 9.6 8.7 8.3Industrial production, % y/y -3.7 -11.2 5.3 5.0 5.0Consumer prices, % y/y 3.8 -0.3 1.6 3.0 2.0Consumer prices ex. energy and food, % y/y 2.3 1.7 1.0 1.2 1.6Hourly earnings, % y/y 3.8 3.0 2.4 2.0 2.5Current account (USDbn) -668.9 -378.4 -470.2 -536.8 -596.3 - % of GDP -4.7 -2.7 -3.2 -3.5 -3.7Federal budget balance (USDbn) -680.5 -1,471.3 -1,275.1 -1,350.0 -1,100.0- % of GDP -4.7 -10.4 -8.7 -8.8 -6.8Gross public debt, % of GDP 75.6 86.4 94.5 103.3 110.1* Contribution to GDP growth (% points)16 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 16. ■ USAthis debt reduction. The Democrats still want large tax The US is backincreases for the rich, while the Republicans only want 102 Index Q1 2008=100 Real GDP Index Q1 2008=100 102spending cuts. 100 100 USSo we do not consider it very likely that political agree-ment on significant fiscal policy tightening in 2011 and 98 98 Euro area2012 will be reached, apart from the expiry next year ofthe current stimulus measures (tax cuts and extended un- 96 96employment benefit period). But there is reason to hope UKthat policymakers will agree to tighten fiscal policy 94 94sharply beyond this time horizon during the ongoing ne-gotiations. A long-term strategy will reduce the risk of a 92 92 07 08 09 10 11sovereign debt crisis in the US as well as the risk that afiscal policy austerity package will dampen the upswing Source: Nordea Markets and Reuters Ecowinover the next couple of years. Economic dynamics normalised 12 12Monetary policy tightening at the end of the year % Private payrolls % Change from business cycle troughGiven our expectation that fiscal policy will not be tight- 10 Range for the six recessions 1958-1982 10ened significantly until after the presidential election in 8 1990-1991 recession 8 2001 recession2012, monetary policy will most likely be the main tool Current cyclefor tightening economic policy over the next few year, 6 6reducing the risk of high inflation and new bubbles. 4 4 2 2We still do not expect the first rate hike until Decemberthis year. The Fed will probably signal its coming rate 0 0hike move in the autumn, maybe August or September. -2 -2Owing to the banks’ huge excess reserves and the low -18 -12 -6 0 6 12 18 24starting point for interest rates, we expect the Fed to pro- Months after the recession ended Source: Nordea Markets and Reuters Ecowinceed quite aggressively when it finally starts to normalisethe interest rate level. On a 2-year horizon we expect the Credits flowing againfed funds rate to be hiked to 3.50%. The Fed’s rate hikes 50 14 % over 12 weeks (ar) %should lead to a strengthening of the USD versus the 40 12EUR throughout most of the forecast period. Commercial and industrial loans at commercial banks 30 10Risks on both sides 20 8As always the growth forecast is subject to both upside 10and downside risks. On the upside the main risk is still 0 6that we underestimate the extent of pent-up demand in 4 -10both households and companies. With the continued up-lift from global demand it cannot be ruled out that the -20 Fed funds rate, rhs 2well-consolidated companies expand capacity and hire -30 0more new employees than currently estimated. An unex- 84 86 88 90 92 94 96 98 00 02 04 06 08 10pectedly sharp rise in bank lending activity will likewise Source: Nordea Markets and Reuters Ecowinresult in an even stronger upswing. Core inflation on the riseOn the downside there is also still a risk that an addi- 4 % (ar) Core CPI % (ar) 4tional sharp decline in housing prices will hit consumer 6-month change 3-month changespending hard. The economy should be able to absorb an 3 3expected further decline in housing prices of around 2-5% from the current level given the now high level of 2 2household savings. But an even steeper price drop cannotbe ruled out. High commodity prices could also lead to 1 1significantly weaker growth than in our baseline sce- 12-month changenario. And lastly fiscal policy also constitutes an impor- 0 The Feds perceived comfort zone 0tant downside risk. (based on the FOMCs longer-run PCE inflation forecast) -1 -1 00 01 02 03 04 05 06 07 08 09 10Johnny Bo Jakobsen Source: Nordea Markets and Reuters EcowinJohnny.jakobsen@nordea.com +45 3333 617817 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 17. ■ Euro areaHigh commodity prices to keep the ECB on rate hiking path• Resilient growth in spite of debt crisis gives the EU an option to extend the current lending package to Greece. Thus, according to the agreement• Higher commodity prices likely to dampen growth with the EU and the IMF Greece has so far been sup-• High inflation leads to a more aggressive ECB stance posed to return to financial markets in 2012 raising EUR 40 bn, something which looks increasingly unrealistic.• We still expect the ECB to pause at 2.25% These steps are all useful, but they do not fundamentallyHigh commodity prices to dampen growth alter the strategy chosen so far; it is still the hard slog ofThe recovery in the Euro area has been surprisingly resil- fiscal austerity and structural reform that offers the bestient in the face of the sovereign debt crisis, and this has prospect of curbing the debt crisis. This is unlikely toled us to adjust our growth forecast for 2011 upwards bring immediate results, and market jitters are highlyonce again. Activity indicators have continued to indicate likely to recur, as it happened at the beginning of Aprilstrong growth in the first half of this year, and so far when Portugal was forced to seek help from the EU andthere is little evidence of any substantial negative impact the IMF.from the Japanese earthquake or the higher oil prices.However, the surge in prices of oil and other commodi- With regards to fiscal policy, we expect the tightening ofties is the main reason why we have downgraded our fiscal policy to subtract about 0.8% point from Euro-areagrowth forecast for 2012. In addition to the direct impact growth in 2011 and 0.5% point in 2012. The fiscal tight-on consumer spending and business investment, the high ening will be concentrated in some of the more vulner-level of commodity prices has also provoked a more ag- able member states, while the fiscal tightening planned ingressive stance on monetary policy at the ECB, which Germany will be fairly mild. Thus, the growth perform-also could weigh slightly on growth in 2012. Indeed a re- ance of the individual member states is likely to be quitenewed surge in oil prices represents one of our main risk uneven, with a high risk of further declines in economicscenarios on the downside, while stronger global growth activity in the more vulnerable member states, whilerepresents our main upside risk scenario for the Euro Germany will still experience fairly robust growth.area. The sovereign debt crisis still provides considerableDebt crisis mainly affects peripheral countries downside risk for the Euro area. A Greek debt restructur-At the EU summit at the end of March, EU leaders ing would most likely cause most of the Greek banks toagreed to increase the lending capacity of the European become insolvent, while specific banks in Germany andFinancial Stabilisation Fund (EFSF). This ensures that France could also face significant losses. The uncertaintythe EFSF can borrow up to EUR 440bn in financial mar- created by such a scenario could lead to renewed tighten-kets without jeopardising its AAA rating, as it was origi- ing of credit conditions, which could choke the recovery.nally intended. This has effectively ensured that even Secondly, the tightening of fiscal policy could still have aSpain would be able to get a bailout package if the need larger effect on growth than estimated.should arise. In addition, EU leaders agreed that theEFSF and the ESM will be allowed to buy sovereign debt Inflation to weigh on consumption growthfrom Euro-area member states in primary markets. This The surge in energy and food prices has already pushedEuro area: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (EURbn) 2008 2009 2010 2011E 2012EPrivate consumption 5,184 0.4 -1.1 0.7 1.1 1.4Government consumption 1,807 2.3 2.5 0.7 0.3 0.0Fixed investment 1,971 -1.0 -11.3 -0.8 3.0 4.1Stockbuilding* 39 -0.2 -0.8 0.4 0.0 0.0Exports 3,741 0.7 -13.1 10.6 7.4 6.0Imports 3,606 0.6 -11.8 8.7 6.2 6.0Net exports* 135 0.1 -0.8 0.9 0.6 0.1GDP 0.3 -4.0 1.7 1.9 1.8Nominal GDP (EURbn) 9,030 9,243 8,954 9,179 9,504 9,825Unemployment rate, % 7.6 9.6 10.1 9.9 9.5Industrial production, % y/y -2.4 -13.8 4.0 3.5 3.0Consumer prices, % y/y (HICP) 3.3 0.3 1.6 2.8 1.8 - core inflation 2.4 1.3 0.9 1.4 1.4Hourly labour cost, wages and salaries % y/y 3.2 1.6 1.5 1.6 2.0Current account (EURbn) -134 -52 -56 -70 -100 - % of GDP -1.5 -0.6 -0.6 -0.7 -1.0General govt budget balance, % of GDP -2.0 -6.3 -6.3 -4.6 -3.6Gross public debt, % of GDP 69.7 79.1 84.7 86.4 87.2* Contribution to GDP growth (% points)18 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 18. ■ Euro areaEuro-area consumer prices significantly higher, and this Euro-area labour markets look set to improvewill most likely dampen consumption growth over the 60.0 Index % 6M/6M, ar 3coming quarters. With unemployment still at elevated 57.5 Employment, rhs 2levels in most Euro-area member states, it seems unlikely 55.0that households will be fully compensated for the rising 1 52.5energy prices, even though some member states still haveinflation claw-back clauses embedded in wage agree- 50.0 0ments. Nevertheless, Euro-area households are still likely 47.5 PMI Composite, -1to benefit from a gradual improvement in Euro-area la- 45.0 employment, advanced 3Mbour markets. Furthermore, growth in private consump- -2 42.5tion will most likely be supported by a further decline inthe savings rate. Thus, we still expect consumption to ac- 40.0 -3 99 00 01 02 03 04 05 06 07 08 09 10 11celerate in 2012, supporting a self-sustained recovery. Source: Nordea Markets and Reuters EcowinWhile domestic demand is likely to pick up speed, ex- Consumer gloom begins to weigh on spending againports are expected to fade as a growth driver. Export de- 7.5 5mand is likely to continue growing, albeit at a more Net balance Retail sales, % y/y 5.0 3M mov. avg., rhs 4moderate pace as the catch-up in world trade is fading 2.5 3out. The recent relatively sharp appreciation of the EURcould also weigh on export growth, but this situation 0.0 2should be reversed in 2012 when we expect the EUR to -2.5 1weaken again. -5.0 0 -7.5 -1ECB has begun a normalisation of policy -10.0 -2 Financial situation of households in 12MWith headline inflation running well above its target of -12.5 -3close to but just below 2%, the ECB decided to hike in- -15.0 -4terest rates by 25 bp at its meeting in April. The ECB is 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10clearly concerned that the current high level of inflation Source: Nordea Markets and Reuters Ecowinwill become entrenched, and the ECB has repeatedlycalled for the abolition of inflation indexation in wage High inflation will keep the ECB in hawkish moodcontracts. In addition to hiking interest rates it has also 4.0 4.0 % y/y % y/ysought to anchor inflation expectations by verbally em- 3.5 3.5phasising its commitment to its price stability mandate. 3.0 HICP inflation 3.0 2.5 2.5Looking forward we expect the high level of oil prices to 2.0 2.0keep inflation at elevated levels well into the second half 1.5 1.5of 2011. Given our expectation of a stabilisation in com- HICP, excl. energymodity prices, we expect inflation to fall below 2% early 1.0 and unprocessed food 1.0next year. However, with increasing signs that high 0.5 0.5commodity prices are spilling over to core inflation, we 0.0 0.0 Forecastexpect the ECB to maintain a hawkish stance for the rest -0.5 -0.5of 2011. Thus, we now expect the ECB to hike rates by 98 99 00 01 02 03 04 05 06 07 08 09 10 11 1225 bp again already in July, followed by another 25 bp Source: Nordea Markets and Reuters Ecowinhike in October. In addition, we expect the ECB to nor-malise liquidity policy towards the end of 2011, causing Lending points to limited number of rate hikesEONIA rates to move back above the ECB’s refi-rate by 0.75 % % 6M/6M (ar) 17.5the end of the year. We still expect the ECB to go on 15.0 0.50hold after bringing interest rates to 2.25% in Q1. Euro- Lending to households and non-financial companies, rhs. 12.5area labour markets have only recently begun to improve, 0.25 10.0and credit to the private sector is still growing at a mod-erate pace. This suggests that inflationary pressures are 0.00 7.5still well contained over the medium term. 5.0 -0.25 2.5Anders Matzen -0.50 0.0Anders.matzen@nordea.com +45 3333 3318 Rate changes -0.75 -2.5 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin19 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 19. ■ United KingdomRebalancing at the expense of growth near termThe UK economy is caught in a critical transition phase. Sharp budget deficit tighteningDomestic demand is under severe pressure owing to 14 % of GDP Public sector net borrowing % of GDP 14negative real wage trends and continued high unem- 12 12ployment. At the same time the very ambitious austerity Cyclical contrib. to budget deficit Structural budget deficit 10 10programme launched by the new government to reducethe public budget deficit is squeezing consumers’ pur- 8 8chasing power. The programme aims to strengthen public 6 6budgets by GBP 126bn by 2015. The goal is to rebalance 4 4the UK economy towards greater focus on investmentand net exports and less reliance on government and pri- 2 2vate consumption. 0 0 09 10 11 12 13 14 15In recent years the weakening of the GBP has strength- Fiscal year startingened corporate competitiveness markedly: in trade- Source: Nordea Markets and Reuters Ecowinweighted terms the value of the GBP has dropped more Household spending under pressurethan 15% below the 1998-2008 average. Combined with 25 10the significant improvement in key export markets, this Net % % y/yhas given UK exporters a strong tailwind over the past 15 Household spending, rhs 8few years. However, going into 2012 there is a risk that 5 6export growth may decline in the wake of the expected 4setback in economic growth, notably in the Euro area. -5 2But we expect these waning growth rates to be offset by -15 0a renewed increase in consumer spending during 2012, -25which overall will ensure acceleration in economic Consumer confidence index, -2 advanced 6Mgrowth during the forecast period. -35 -4 -45 -6Despite major internal strife the Bank of England has 86 88 90 92 94 96 98 00 02 04 06 08 10maintained its extremely lenient monetary policy. Even Source: Nordea Markets and Reuters Ecowinagainst the backdrop of sharply rising consumer pricesthat are currently increasing at twice the official target of High inflation but no imminent rate hikes2%. We expect inflation to remain very high over the 6 6 % y/y CPI-inflation % y/ycoming months and quarters, chiefly driven by base ef- 5 5fects from the higher commodity prices and the upturn in CPIconsumer prices resulting from the VAT. Into 2012 we 4 4expect inflation to fall back in step with the base effects 3 3losing momentum. That is why we do not expect the BoE BoE targetto follow in the ECB’s footsteps in the near term but to 2 2wait until early 2012 before embarking on the upcoming 1 1normalisation of monetary policy. Core CPI (ex. energy and unprocessed food) 0 0Jan Størup Nielsen -1 -1Jan.storup.nielsen@nordea.com +45 3333 3171 00 01 02 03 04 05 06 07 08 09 10 Source: Nordea Markets and Reuters EcowinUnited Kingdom: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (GBPbn) 2008 2009 2010 2011E 2012EPrivate consumption 896.0 0.4 -3.2 0.6 0.4 1.7Government consumption 296.1 1.6 1.0 0.8 -0.6 -1.1Fixed investment 249.5 -5.0 -15.4 3.0 3.1 4.5Stockbuilding* 5.8 -0.4 -1.2 1.4 0.6 0.0Exports 374.0 1.0 -10.1 5.3 7.0 6.3Imports 417.0 -1.2 -11.9 8.5 5.4 3.7GDP -0.1 -4.9 1.3 1.5 2.2Nominal GDP (GBPbn) 1,404.8 1445.6 1395.0 1453.6 1522.9 1599.1Unemployment rate, % 5.7 7.6 7.8 8.2 8.0Consumer prices, % y/y 3.6 2.2 3.2 4.1 2.0Current account, % of GDP -1.6 -1.7 -2.5 -2.0 -1.5General govt budget balance, % of GDP -5.0 -11.3 -10.5 -8.0 -6.0Gross public debt, % of GDP 52.1 68.2 78.7 86.7 92.7* Contribution to GDP growth (% points)20 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 20. ■ JapanCatastrophe will have severe economic impactThe tragic earthquake and tsunami and nuclear catastro- Industrial production to suffer for longphe are chiefly a human tragedy, but though too early to 32 % y/y Industrial production % y/y 8gauge fully, the economic consequences are also set to be 24 6very severe, with GDP growth likely slowing to a little 16 GDP, rhs. 4below 0% this year. The government has estimated that 8 2the direct damage amounts to JPY 25trn or 5% of GDP. 0 0Industrial production fell a nasty 15% from March to -8 -2April and is likely to continue falling due to the de- -16 -4stroyed production capacity. Also the lack of electricity -24 -6and the rolling black-outs lower industrial production and -32 -8postpone the reconstruction process, and supply chainproblems also act as a drag. On top of the supply side -40 -10 02 03 04 05 06 07 08 09 10 11problems comes the demand side. Households are de-pressed and refrain from discretionary spending. The Source: Nordea Markets and Reuters Ecowinconsequence is the already observable steep drop in retail Strong contraction in household spendingsales that will translate into very weak private consump- 5.0 5.0tion figures. Overall economic growth will get a strong % y/y Private % y/yboost once the rebuilding process gathers momentum 2.5 consumption 2.5later this year, especially via public spending and in-vestment. This will push GDP growth back up to close to 0.0 0.03% in 2012. Note that some production capacity espe- -2.5 -2.5cially in the export sector will probably never be rebuiltdue to permanently lost market shares abroad and off- -5.0 -5.0shoring to neighbouring low-cost countries. -7.5 Retail sales -7.5The rebuilding costs will weigh on the already huge pub- -10.0 -10.0lic debt (currently above 200% of GDP gross), which 05 06 07 08 09 10surely increases the risk of funding problems. Note, Source: Nordea Markets and Reuters Ecowinhowever, that a funding crisis is not imminent becausethe private sector in Japan has a huge saving surplus and Deterioration of already huge public debtmost government bonds are held domestically. 225 225 % of GDP % of GDP 200 Government debt, 200The Bank of Japan expanded its quantitative easing pro- (gross financial liabilities)gramme as the crisis unfolded and is likely to remain ac- 175 175commodative throughout the forecast period. Any 150 150marked JPY strengthening is likely to be met by furtherintervention. Once the other mature economies’ central 125 125banks hike their interest rates in earnest, Japan will again 100 Government net debt, 100 (net financial liabilities)become a low-interest rate country, implying a weaker 75 75JPY. This should support the hard-pressed export sector. 50 50 00 01 02 03 04 05 06 07 08 09 10Bjarke Roed-Frederiksenbjarke.roed-frederiksen@nordea.com +45 3333 6178 Source: Nordea Markets and Reuters EcowinJapan: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (JPYbn) 2008 2009 2010 2011E 2012EPrivate consumption 292,523 -0.7 -1.9 1.8 -0.9 1.7Government consumption 92,218 0.5 3.0 2.3 3.5 1.0Gross fixed capital formation 118,237 -3.6 -11.7 -0.2 3.5 5.0Stockbuilding* 3,910 -0.3 -1.4 0.6 0.2 0.1Exports 90,830 1.6 -23.9 24.0 -3.5 7.5Imports 82,198 0.4 -15.3 9.8 5.0 4.0GDP -1.2 -6.3 3.9 -0.1 2.9Nominal GDP (JPYbn) 515,520 504,378 470,937 479,179 478,021 493,812Unemployment rate, % 4.0 5.1 5.1 4.8 4.5Consumer prices, % y/y 1.4 -1.3 -0.7 -0.1 0.4Current account, % of GDP 3.2 2.8 3.6 2.6 2.9General government budget balance, % of GDP -2.1 -7.1 -7.7 -10.0 -8.0* Contribution to GDP growth (% points)21 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 21. ■ PolandSlowing just a bit• Weaker momentum have had some dampening effect on household spending and we expect additional fiscal tightening after the au-• Tighter economic policies tumn’s elections. The full effect of the tightening of• Consumers are getting more pessimistic monetary policy so far, with reserve requirement hikes as of 1 January and interest rate hikes in January and April,• Elections also important to keep EMU as an anchor will not be seen until late in the year and during next year. The weakening of the PLN would normally beThe economy continued at a fairly strong pace around thought of as an easing of monetary conditions, but this4.5% y/y in the first quarter of 2011, but as expected the effect is likely to be partly offset due to the significantunderlying momentum slowed somewhat at the end of share of FX loans among households.2010 and going into 2011. Indeed, the annualised quar-terly growth rates have probably been just above 3% in The Monetary Policy Committee (MPC) of the Nationaleach of the two most recent quarters. This means that we Bank of Poland (NBP) seems to have made an effort tokeep our slightly below consensus call for growth for the communicate clearer with the markets, but significantwhole of 2011 of just below 4% followed by slightly disagreements within the MPC may be the reason why ithigher growth in 2012. is still not entirely clear what the big plan is. We choose to listen to NBP President Belka, who seems reluctant toAt just below 4% growth, Poland will still be one of the hike too fast. The latest indication of Mr Belka’s dovishbest performing economies in Central and Eastern Eu- stance was the agreement with the Ministry of Financerope, which is even more impressing when considering that the Ministry may exchange parts of its EUR flowsthat the country has suffered relatively less than other from the EU, which could amount to EUR 13-14bn thiscountries in the region during the crisis and hence that year, in the markets. The justification is that excess li-the comparison base is less favourable. In our forecasts quidity in the money market reduces the effect of theonly Turkey and Russia in Central and Eastern Europe NBP’s interest rate hikes and hence conversion of EUwill see significantly higher growth than Poland this funds can be used to reduce PLN liquidity to makeyear. monetary policy more effective. Moreover, a stronger PLN as a consequence of the intervention may alleviateWeaker momentum in exports some of the pressure to hike interest rates. However, itThe main reason for the slowing momentum seems to be does not fit well with the communication from Mr Belkaexports. Exports have showed a broad-based slowdown, since he took office almost a year ago, where he has triedbut with a certain variety across Europe. Indeed, exports to communicate that the NBP has no target for the PLNto some of Poland’s key foreign markets such as France and will not intervene in the FX market unless the distor-and Italy have weakened in particular, whereas exports to tions constitute a risk to the inflation target.Germany, the largest destination by far for Polish ex-ports, are holding up rather well as are exports to Russia. We expect a total of five interest rate hikes this year andWe expect slowing foreign demand growth during the a gradual appreciation of the PLN due primarily to the in-year, which should lead to a further weakening of the terest rate hikes, the Ministry of Finance’s intervention inmomentum in exports, followed by some improvement in the FX markets and the still sound economic fundamen-2012. tals.Tighter economic policies Consumers are getting more pessimisticAnother reason for the weaker growth momentum is in The key uncertainty regarding the growth outlook is con-our view the tightening of economic policies. The 1% sumer spending. Consumer spending growth surprisedpoint VAT hike and other fiscal tightening measures positively during most of last year and only showedPoland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (PLNbn) 2008 2009E 2010 2011E 2012EPrivate consumption 702 5.7 2.1 3.2 2.6 3.2Government consumption 211 7.4 2.0 3.5 3.2 0.1Gross fixed capital formation 254 9.6 -0.8 -2.0 8.5 9.8Exports 480 7.0 -8.5 10.2 5.6 7.0Imports 513 8.1 -12.5 10.7 9.7 6.1GDP 5.1 1.7 3.8 3.7 4.0Nominal GDP (PLNbn) 1,177 1,275 1,344 1,416 1,521 1,611Unemployment rate, % 9.8 11.0 12.1 11.8 10.1Consumer prices, % y/y 4.4 3.8 2.7 3.8 1.9Current account, % of GDP -4.8 -2.1 -3.4 -4.7 -4.2General government budget balance, % of GDP -3.7 -7.3 -7.9 -6.0 -4.5* Contribution to GDP growth (% points)22 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 22. ■ Polandslowing momentum in the final quarter. Tighter eco- Exports losing momentumnomic policies will have a negative effect in the forecast 25 % y/y % y/y 25period, but the labour market continues to improve and 20 20will provide solid support to real disposable incomes. 15 15Employment growth hovers around 1% y/y, but indica- 10 Exports 10tors for the larger companies suggest a faster pace at the 5 5beginning of 2011 Wage growth remains moderate and 0 0with the recent increase in inflation real wage growth is -5 -5close to zero. Still, we expect real wage growth to in- Industrial production -10 -10crease gradually during the coming two years, as wage -15 -15growth picks up speed and inflation slows. The consum-ers are getting more pessimistic, though. Indeed, accord- -20 -20 05 06 07 08 09 10 11ing to the consumer confidence survey, more households’now see their financial situation deteriorating over the Source: Nordea Markets and Reuters Ecowincoming 12 months. As a consequence, the savings rate Employment growth picks up speedjumped towards the end of 2010 according to our calcu- 7 7lations. % y/y Employment % y/y 5 5Investment growth to increase Whole economy Enterprises 3 3Investment has not recovered in earnest from the crisisand has potential to provide some upside surprise. Next 1 1year’s European Soccer Championship, which Poland co- -1 -1hosts with Ukraine, is likely to require additional invest- -3 -3ment during the next year or so, though everything Industryshould be running according to the plan. Moreover, busi- -5 -5ness investment is likely to accelerate with the increase -7 -7in the capacity utilisation rate. 04 05 06 07 08 09 10 Source: Nordea Markets and Reuters EcowinElections also important to keep EMU as an anchorGeneral elections are scheduled for October at the latest. Consumers are getting more pessimisticCurrently, the leading party of the incumbent govern- 20 -25 % of disposable incomes Net balancement, the Civic Platform (PO), looks set to secure an- 18other victory and is most likely to lead the next govern- 16 Households expected -20 financial conditions next 12M,ment also. However, as the polls look at present the PO 14 reversed axis, rhs -15will not be able to form a majority government on its 12own. Moreover, it will be important for the EMU road 10 -10map that two-thirds of the parties in the next government 8 Savings rate, saback a change of the constitution to allow EMU member- 6 -5ship. Public support for EMU membership is at an all- 4 0time low, which is most likely because of the current 2state of the EMU. However, the EMU is a very important 0 5anchor for economic policies and real convergence, as 01 02 03 04 05 06 07 08 09 10 11we see it. Source: Nordea Markets and Reuters EcowinAnders Svendsen More interest rate hikes seenanders.svendsen@nordea.com +45 3333 3951 7.5 7.5 % % Implied NBP policy changes (FRAs) 7.0 (1M, 3M, 6M and 9M) 7.0 6.5 6.5 6.0 6.0 3M deposit rate 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 Repo rate 3.5 3.5 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin23 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 23. ■ RussiaTwo steps forward, one step back• Moderate recovery in Q1 led by consumers bounded at the end of Q1, and strong growth in housing starts points toward more activity in the pipeline.• Investments to rebound in the coming quarters• Monetary policy focus on inflation increases Conditions are favourable for financing new investments, since domestic average lending rates in RUB for compa-The economy has slowly regained momentum after the nies have fallen to below 9%, the lowest level on record,shock last summer. As expected, consumers remained in and bank lending to companies has accelerated further.the driver’s seat in the recovery process in Q1. Russia’s Even though the Central Bank of Russia (CBR) hasstatistics agency (Rosstat) revised upward retail sales started raising interest rates, anecdotal evidence suggestsfigures recently, and this makes room for upward revi- that commercial banks are not in a rush to raise theirsion of consumption in Q4 and Q1 2011. The only con- lending rates as bank excess liquidity is still ample andcerning thing is inflation, which has eroded real wage the “competitive margin” may be reduced further.growth. Yet a rather fast drop in unemployment to below7% on the back of strong employment growth makes Budget flourishes on oilroom for more bargaining power for consumers in the One of the major changes over the past quarter has beencoming quarters. Moreover, given the momentum in re- the revisions to the oil forecast, which are expected totail sales, we believe consumers might be getting addi- help boost government revenue by nearly 20% more thantional support from non-official/“shadow” compensation, budgeted for this year. In principle, with our oil pricewhich could have risen after the increase in business so- forecast of above USD 110/bbl for 2011, the governmentcial contribution taxes from 26% to 34% this year. budget should be in balance, in contrast to the 3.6% defi- cit budgeted in late 2010. Yet significant risks are relatedOther indicators also suggest recovering consumption: to pre-election spending, and additional spending willdeposit growth has finally slowed down and the savings likely leave the fiscal balance negative in 2011, albeitrate has fallen from nearly 16% in early 2010 to just with a big chance of zero balance in 2012. So far theabove 10% now, implying that consumers opt for more government intends to “save” excess oil reserves by re-spending rather than saving. This is not surprising, given suming refilling the Oil Reserve Fund: the current plan isthe improvement in labour market, as well as lack of in- to double the fund from the current RUB 760bn. But po-centive to save with inflation of above 9.5% and average litical will and legislative changes are needed first.time deposit rates of just above 6%. There are both pros and cons to higher oil prices. Need-Capex disappointment temporary less to say, consumption will be bolstered by the directAnother component of domestic demand – fixed capital and indirect effect of higher oil prices – private compa-investment – did not develop as well as expected, accord- nies will have the capacity to raise wages and the gov-ing to monthly capex statistics. After the 10.6% y/y ernment will most likely carry out a second round ofgrowth in Q4 2010, fixed capital investment contracted wage indexation in the early autumn. However, strong1.8% y/y in Q1. Yet coincident and leading indicators for current account inflows, coupled with private capital in-investment – interest rates, business confidence, imports flows, will put pressure on the CBR and its monetaryof machinery etc – all point toward higher investment policy. If not properly sterilised, as has been the case ingrowth in future. Industrial production is back at a pre- pre-crisis times, strong inflows will likely translate intocrisis growth pace of 5-6% y/y, and the forward-looking excess domestic liquidity - and double-digit inflation.PMI indicators suggest strong momentum at least for H12011 – for example, the PMI manufacturing new orders Inflation: from food to coreindex is at 3-year highs. Moreover, construction, which Food price inflation, having peaked in January, has de-constitutes the bulk of fixed capital investment, has re- celerated in Q1, helped by global food price develop-Russia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (RUBbn) 2008 2009 2010 2011E 2012EPrivate consumption 16,193 11.2 -7.6 4.3 5.8 6.5Government consumption 5,745 2.5 2.0 1.2 1.8 2.0Fixed investment 6,984 10.0 -16.5 4.4 7.8 7.0Exports 10,029 0.5 -4.6 8.8 5.6 5.8Imports 7,138 15.0 -30.2 20.0 15.5 8.0GDP 5.6 -7.9 4.1 5.4 5.7Nominal GDP (RUBbn) 33,258 41,445 39,064 45,300 51,805 58,864Unemployment rate, % 5.6 7.5 7.5 6.5 5.8Consumer prices, % y/y 14.1 11.7 6.9 8.5 7.5Current account, % of GDP 6.2 3.9 4.7 4.3 3.5Central govt budget balance, % of GDP 4.1 -5.3 -4.2 -1.5 -1.0* Contribution to GDP growth (% points)24 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 24. ■ Russiaments and domestic measures – from sales of grain from Strong momentum for GDP from PMI surveysreserve funds to monetary policy tightening. Headline in- 16 % y/y Index 64flation remained nearly unchanged at around 9.5% in Q1. 12 PMI manufacturing, rhs 60The government expects to reduce inflation to 4-5% by 56 82014. The CBR’s goal for 2011 is to keep inflation 52within 6-7%. Yet this is a difficult task – even though 4food price inflation decelerates, non-food prices have 48 0ticked up. The labour market has tightened recently, 44 GDPcausing core inflation to accelerate to nearly 8% y/y, with -4 40more upside expected. -8 36The CBR has acknowledged the risks and tightened its -12 32 97 99 00 01 02 03 04 05 06 07 08 09 10monetary policy further in Q1. The priorities seem tohave shifted from keeping the RUB from strengthening Source: Nordea Markets and Reuters Ecowinto maintaining inflation targets, as heard from recent Wages to catch up on rising employmentcomments from government officials. This is just the be- 20 4ginning of the gradual policy tightening cycle, using all % y/y % y/ytools – higher reserve requirements, interest rates and a 16 Employment, 3stronger RUB – to return inflation to the target range. As 12 advanced 3M, rhs 2for interest rates, the CBR will attempt to lift the deposit 1rates higher in order to narrow the operating interest rate 8 0corridor and thus reduce volatility in the domestic inter- 4 Real wages -1bank market. 0 -2RUB appreciation intact -4 -3The RUB basket strengthened visibly in Q1, as the RUB -8 -4became a favoured currency in the Emerging Markets 07 08 09 10 11universe. The CBR has facilitated RUB movements re- Source: Nordea Markets and Reuters Ecowincently, further widening the RUB floating band from 4RUB to 5 RUB in March 2011, leaving the range at Monetary policy – gradual tightening resumes32.45-37.45. According to the CBR’s foreign exchange 16 16 % %intervention mechanism, the CBR moves the floating 14 14band by five kopeck in the direction of the RUB move 12 12each time they have bought/sold a cumulative USD600m in the foreign exchange market. The latter amount 10 10 Refinancing ratewas reduced from USD 700m in September as yet an- 8 8other sign that the CBR is allowing more RUB flexibil- 6 Repo rate 1D 6ity. MosPRIME O/N, 4 1M mov. avg. 4Given our new oil price forecast of above USD 110/bbl 2 Depo rate O/N 2for this year, we believe the basket will strengthen to 32 0 0by the end of the year, with risks skewed toward an even 07 08 09 10 11stronger RUB. The key risk is any uncertainty or turmoil Source: Nordea Markets and Reuters Ecowinover the outcome of the upcoming elections. For exam-ple, if President Medvedev and Prime Minister Putin fall Stronger RUB on the horizonout and one of them leave the “tandem”, domestic firms 43 43 Basket Basketmay see this as sign of political tension raising the risk of 41 41capital outflows. Floating bands 39 39 37 37Aurelija Augulytėaurelija.augulyte@nordea.com +45 3333 6437 35 35 33 33 RUB basket 31 31 (55% USD and 45% EUR) 29 29 27 27 Forecast 25 25 07 08 09 10 11 12 Source: Nordea Markets and Reuters Ecowin25 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 25. ■ EstoniaRecovery spreading to the domestic economyThe recovery has proceeded faster than initially antici- Long-term unemployment edging uppated, and the encouraging signs from the domestic 160 (000) persons (000) persons 160economy which materialised during the second half of 140 140last year have largely continued this year. Together with 120 120still good momentum in exports, this is expected to sup- 100 100port the economy to a brisk recovery this year. 80 80 UnemploymentThe cautious strengthening in retail sales is supported by 60 60a faster-than-anticipated decline in unemployment and a 40 40modest rise in wages. However, the acceleration in infla- 20 Long-term unemployment 20tion weighs on consumers’ purchasing power, with infla- (at least 24M)tion still largely above wage gains. In addition, the un- 0 0 03 04 05 06 07 08 09 10employment rate is still in double digits and likely to stayelevated in the near future. Reducing structural and long- Source: Nordea Markets and Reuters Ecowinterm unemployment remains one of the main challenges Commodity prices have pushed up inflationof the authorities in the medium term. The recovery is 25 25thus still dependent on foreign demand, and a slowdown % y/y % y/yin demand in Europe and especially the Nordic countries 20 20would have adverse effects on the recovery. 15 Wages, 3M mov. avg. 15Inflation has continued to accelerate, with food and en- 10 10ergy prices the main culprits. However, as the accelera- 5 5tion in food prices seems to have stabilised also the infla- Inflation 0 0tion rate has levelled out, albeit remaining at a high level.The support from higher global commodity prices is seen -5 Food and non-alcoholic beverages -5as temporary, and with domestic demand still fragile and -10 -10pressure from for instance wages still modest, we expect 00 01 02 03 04 05 06 07 08 09 10some moderation in inflation towards the end of the year. Source: Nordea Markets and Reuters EcowinThe government budget posted a tiny surplus in 2010.Especially the sale of emission allowance units boosted Confidence in the economy has strengthenedrevenues, but the investments to be made with the reve- 1200 bp bp 1200 CDS (5Y), spread to Germanynues will weigh on the deficit going forward. Overall 1000 1000government finances nevertheless remain strong. As the Latviarecovery has continued government finances have turned 800 800out better than expected and the financial markets have 600 600calmed down, reflecting increasing confidence in theeconomy. This supports expectations of upgrades to Es- 400 400tonia’s single A credit rating. 200 Estonia 200 0 0Annika Lindblad Finland Franceannika.lindblad@nordea.com + 358 9 1655 9940 -200 -200 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 09 10 11 Source: Nordea Markets and Reuters EcowinTönu Palmtonu.palm@nordea.com + 372 628 3345Estonia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (EURbn) 2008 2009 2010 2011E 2012E Private consumption 8.7 -5.4 -18.4 -1.9 4.5 4.5 Government consumption 2.6 3.8 0.0 -2.1 1.3 1.7 Fixed investment 5.5 -15.0 -32.9 -9.1 14.2 7.0 Exports 10.7 0.4 -18.7 21.2 17.8 5.2 Imports 12.4 -7.0 -32.6 20.9 16.6 6.3 GDP -5.1 -13.9 3.0 5.7 3.8 Nominal GDP (EURbn) 15.8 16.1 13.9 14.5 16.1 17.2 Unemployment rate, % 5.5 13.8 16.9 12.4 10.7 Consumer prices, % y/y 10.6 -0.1 3.0 5.0 2.9 Current account, % of GDP -8.8 4.5 3.8 0.9 -0.1 General govt budget balance, % of GDP -2.8 -1.7 0.1 -0.7 -2.7* Contribution to GDP growth (% points)26 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 26. ■ LatviaRecovery gradually gaining momentumThe focus is increasingly shifting to growth, as the finan- Especially unemployment expectations optimisticcial markets have remained calm and the budget gap is 20 Index Financial situation of households Index 100being closed even faster than required by the IMF/EU. over next 12M 10 80After an already promising 2010 we see the recoverygaining strength this year, as the export-led upturn is be- 0 60ing supported by firming domestic demand. The faster-than-anticipated decline in unemployment has contrib- -10 Unemployment expectations 40uted to the dawning recovery of household demand. 12M ahead, rhs -20 20Overall, consumer confidence is improving and espe-cially unemployment expectations are optimistic. How- -30 0ever, gains in employment could remain modest due tohigh structural unemployment and the continued emigra- -40 Note: historical averages since 2000 -20 05 06 07 08 09 10 11tion of the active population. Source: Nordea Markets and Reuters EcowinInflation has sped up due to global price trends and indi- Inflation accelerating mainly on food pricesrect tax hikes. With the effects from higher food and en- 35 35ergy prices expected to be temporary and domestic de- % y/y % y/y 30 30mand-driven price pressure still modest, we see inflation 25 25moderating gradually. Nevertheless, accelerating infla- Wages 20 20tion erodes the purchasing power of those consumers 15 15who do not see matching income growth. A risk is also Inflation, food 10 10connected to fulfilling the Maastricht criterion for infla- 5 5tion in 2012, putting euro adoption in 2014 at risk. Con- Total inflation 0 0cerning the budget deficit Latvia is aiming at 2.5% of -5 -5GDP in 2012. With financial markets calm and the econ- -10 -10omy recovering, confidence in the economy is improv- -15 -15ing, and thus further credit ratings upgrades are expected 04 05 06 07 08 09 10 11from the current low levels. Latvia will start refinancing Source: Nordea Markets and Reuters Ecowinits public debt on the financial markets next year andhigher ratings would contribute to lower funding costs. More fiscal consolidation still ahead 60 2 % of GDP % of GDPThe key upcoming political event is the presidential elec- 0tion in late May/early June. With the governing coalition 50not unified in its support for the current president, the -2 40opposition is likely to play an important role. Election of General govt deficit/surplus, rhs -4 (forecast: Nordea)an alternative candidate might result in considerable po- 30litical uncertainty. However, we see a low probability of -6this derailing the economic recovery. 20 Govt consolidated gross debt (forecast: European Commission) -8 10 -10Annika Lindbladannika.lindblad@nordea.com + 358 9 1655 9940 0 -12 00 01 02 03 04 05 06 07 08 09 10 11 12Andris Strazds Source: Nordea Markets and Reuters Ecowinandris.strazds@nordea.com + 371 67 005 252Latvia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (LVLmn) 2008 2009 2010 2011E 2012EPrivate consumption 9,196 -5.2 -24.1 -0.1 3.0 4.2Government consumption 2,575 1.5 -8.7 -11.0 -1.0 -0.5Fixed investment 4,975 -13.6 -37.1 -20.4 14.2 8.0Exports 6,259 2.0 -13.9 10.1 8.8 5.1Imports 9,220 -11.2 -33.3 8.4 9.8 5.4GDP -4.2 -18.0 -0.1 3.6 4.2Nominal GDP (LVLmn) 14,780 16,188 13,083 12,736 13,750 14,740Unemployment rate, % 7.5 17.1 19.4 16.0 14.8Consumer prices, % y/y 15.3 3.6 -1.0 4.5 3.0Current account, % of GDP -13.1 8.6 4.0 -0.2 -1.0General govt budget balance, % of GDP -4.2 -10.2 -7.7 -4.8 -2.6* Contribution to GDP growth (% points)27 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 27. ■ LithuaniaEntering a new growth cycleThe outlook for the economy has continued to brighten. Brisk growth in the beginning of the yearQ1 GDP growth reached close to 7% y/y as all sectors 21 LTL bn % y/y 16expanded in the first quarter, leading also to brisk growth 20 12from the previous quarter. In addition to base effects, the 19 8solid expansion in Q1 also highlights the spreading of the 18 GDP, rhs 4recovery from the export sector, which has continued to 17 0perform well, to the domestic economy. Nevertheless, af- 16 -4ter the initial bounce economic growth is seen moderat- 15 -8ing, as domestic demand and investments remain fragile. 14 -12 GDP level, sa. 13 -16The economy, and especially the industrial sector, hascontinued to benefit from strong demand from its trading 12 -20 02 03 04 05 06 07 08 09 10partners. With exports already above pre-crisis levels thedomestic economy has slowly started to gain a foothold. Source: Nordea Markets and Reuters EcowinRecently retail sales expanded rapidly, but were mainly Employment turning gradually to growthsupported by growing sales of motor vehicles. 25 50 Index (000) persons 40Household demand is thus still facing headwinds from 15 Consumerhigh structural unemployment especially in the construc- confidence 30 5tion sector, weak wage trends, modest consumer confi- -5 20dence and accelerating inflation. As the economy is shift- 10 -15ing from manufacturing to a growing service sector, re- 0 -25ducing structural unemployment is one of the main chal- -10lenges. Another challenge is posed by the elevated infla- -35 -20tion rate. In order to enable euro adoption in 2014 it -45 Employment growth, q/q, -30 3Q mov. avg., rhsneeds to be kept within the Maastricht criterion in 2012. -55 -40However, the main price pressure comes from the most 02 03 04 05 06 07 08 09 10likely temporary food and energy price rises, which indi- Source: Nordea Markets and Reuters Ecowincates that inflation will moderate slightly going forward.The budget deficit is expected to fall to 2.8% of GDP in Inflation accelerating but wage gains still modest2012, a significant improvement from 7.1% in 2010. Cut- 30 30 % y/y % y/yting the deficit to below 3% of GDP in 2012, and thus 25 25adopting the euro in 2014, still requires significant fiscal 20 20consolidation, but at least the year began with signs of a Wages 15 15strong economic recovery, helping Lithuania to reach the 10 10target. The stabilising economy and encouraging pros- 5 5pects for government finances are helping to increase Total inflationconfidence in the economy. 0 0 -5 Inflation (food and -5 non-alcoholic beverages)Annika Lindblad -10 -10annika.lindblad@nordea.com + 358 9 1655 9940 -15 -15 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters EcowinZygimantas Mauricaszygimantas.mauricas@nordea.com + 370 5 2657 198Lithuania: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (LTLmn) 2008 2009 2010 2011E 2012EPrivate consumption 63,736 3.7 -17.7 -4.5 4.8 5.0Government consumption 17,638 7.3 -1.9 -3.4 0.0 1.0Fixed investment 27,919 -5.2 -40.0 0.0 13.8 8.0Exports 53,371 11.6 -12.7 17.4 12.5 5.0Imports 66,537 10.3 -28.4 17.9 14.3 6.0GDP 2.9 -14.7 1.3 4.6 4.0Nominal GDP (LTLmn) 98,669 111,482 91,525 94,641 102,500 110,085Unemployment rate, % 5.8 13.7 17.8 15.7 14.2Consumer prices, % y/y 11.1 4.2 1.3 4.4 3.5Current account, % of GDP -13.1 4.3 1.8 -1.0 -1.5General govt budget balance, % of GDP -3.3 -9.2 -7.1 -5.0 -2.8* Contribution to GDP growth (% points)28 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 28. ■ ChinaGrowth will slow down as authorities fight inflationEconomic growth stayed stronger than expected at the Lower but still relatively solid growth going forwardbeginning of the year, and we have therefore adjusted our 16 % y/y GDP % q/q 16GDP forecast for 2011 upwards although we expect 14 14 y/y, officialgrowth to slow in the coming quarters as the already im- 12 12plemented monetary policy tightening measures will start 10 10to pass through to the economy. Not least constructioninvestment and spending related to housing will slow 8 8down going forward. This is because the authorities seem 6 q/q sa. annualised, 6keen on avoiding further inflating the likely housing 4 official, rhs 4bubble. New measures in order to dampen speculation q/q sa. annualised, 2 Nordea estimation, rhs 2and excessive price increases could well be taken, includ- Forecasting further purchase restrictions and lending regulation 0 0 05 06 07 08 09 10 11 12tightening. The construction activity slowdown should tosome extent be offset by the government’s massive pro- Source: Nordea Markets and Reuters Ecowingramme to build social and low-cost housing. Inflation to peak at close to 6% during summer 24 24With both wages and goods prices increasing strongly, % y/y Inflation % y/y 21 21the coming slowdown is not necessarily a bad thing. Wedo not foresee any collapse of the economy and expect 18 18 Foodgrowth to remain relatively solid around 9% with the 15 15process towards a more balanced economy gradually 12 12gaining momentum. The underlying long-term trend of 9 Total 9increased wealth from productivity gains amid urbanisa- 6 6tion and industrialisation remains intact and should not 3 Non-food 3be hampered by the other very important long-term fac- 0 0tor, namely demographics, which not yet but in some -3 -3years’ time will act as a drag on the economy. 06 07 08 09 10 11 Source: Nordea Markets and Reuters EcowinInflation will likely continue upwards and peak at closeto 6% during the summer. Both the direct and indirect High inflation points to continued CNY revaluationmeasures taken to control price increases will then kick 10 15 % y/y % 2M/2M annualisedin and in combination with base effects send inflation 9down again. Inflation will, however, end above the up- 8 Pace of CNY 12 7ward revised target for 2011 of 4%. A few more interest revaluation, rhs 6 9rate hikes are likely during the summer and the gradual 5revaluation of the renminbi is set to continue in an at- 4 6tempt to dampen inflation. If inflation and especially 3food price increases do not subside, much more drastic 2 3 1economic tightening could prove necessary, posing a risk 0 0to our main scenario of still relatively solid growth. -1 Inflation -2 -3 06 07 08 09 10 11Bjarke Roed-Frederiksenbjarke.roed-frederiksen@nordea.com +45 3333 5607 Source: Nordea Markets and Reuters EcowinChina: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (CNYbn) 2008 2009 2010 2011E 2012EPrivate consumption 9,561 8.4 9.3 9.8 10.0 10.0Government consumption 3,590 9.0 6.1 7.5 9.5 9.0Fixed investment 10,395 9.8 24.2 11.3 10.0 9.5Stockbuilding* 699 0.8 -0.7 -0.5 0.1 0.0Exports 10,210 13.9 -9.1 15.8 10.0 10.0Imports 7,872 15.2 -2.7 12.0 12.0 12.0GDP 9.6 9.2 10.3 9.2 8.8Nominal GDP (CNYbn) 26,583 31,490 34,502 39,798 45,609 51,446Unemployment rate, % 4.2 4.3 4.1 4.1 4.0Consumer prices, % y/y 5.9 -0.7 3.3 5.4 4.0Current account, % of GDP 9.6 5.9 5.2 4.1 3.6General government budget balance, % of GDP -0.4 -2.1 -1.6 -2.2 -1.9* Contribution to GDP growth (% points)29 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 29. ■IndiaLess bright economic outlook due to price pressureThe until recently very bright outlook for India’s econ- Investment dampened by higher interest ratesomy has become a little bleaker and we have adjusted 28 % y/y % y/y 28down our GDP growth forecast by roughly 1% point to 24 24 Investmentaround 8% in 2011 and 2012. The main reason is the per- 20 20sistently high inflation that is eroding households’ pur- 16 16chasing power and forcing the central bank to tighten GDPmonetary conditions even more. This tightening will 12 12eventually dampen economic activity. Especially invest- 8 8 Private consumptionment growth will be subdued going forward due to the 4 4higher interest rates. But also the many corruption scan- 0 0dals in the political system and the lack of functioninggovernance are dampening especially public investment. -4 -4 05 06 07 08 09 10A hard landing of the economy will, however, mostlikely be avoided due to private consumption that will Source: Nordea Markets and Reuters Ecowinremain strong as urban households will prosper from Private consumption to the rescuestrong wage increases. Despite the expected slowdown in 11 70economic growth in the near term, the underlying long- % y/y Index 10term trend remains encouraging, among other factors due Private 60 9 consumptionto favourable demographics and the big pool of labour. 8 50Public finances are chronically in bad shape, and the 7 40deficit is set to once again breach the budget and end at 6above 5% of GDP. Not least the cost of subsidising fertil- 5 30isers and fuels is growing following the surge in the 4 Business confidence,global oil price. 3 employees, rhs 20 2 10Both consumer price inflation and the central bank’s pre- 05 06 07 08 09 10 11ferred measure, wholesale price inflation, have after fal- Source: Nordea Markets and Reuters Ecowinling slightly in H2 2010 stabilised at a still very elevatedlevel around 9% and are not expected to fall meaning- High inflation will not go awayfully soon. As everywhere else, the high inflation is led 18 18 % y/y % y/yby surging food and energy prices. But in India the high 16 Consumer price inflation, 16 all India, industrial workerfood price inflation seems to have become structural. 14 14One explanation is that the improved living standards of 12 12part of the population have changed the consumption pat- 10 10tern structurally to include a more protein-rich diet, the 8 8production of which is far more soft commodity- 6 6intensive. This year’s harvest was good due to a normal 4 4monsoon last summer. Should rainfall during this sum- 2 2 Wholesale price inflationmer’s monsoon be deficient, it will pose a series threat to 0 0the outlook for both inflation and the overall economy. -2 -2 06 07 08 09 10 11Bjarke Roed-Frederiksen Source: Nordea Markets and Reuters Ecowinbjarke.roed-frederiksen@nordea.com +45 3333 5607India: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (INRbn) 2008 2009 2010 2011E 2012EPrivate consumption 28,157 7.9 7.0 6.9 7.0 7.5Government consumption 5,130 10.7 16.4 2.6 6.0 7.0Fixed investment 16,415 1.5 7.3 8.4 10.0 12.0Exports 9,843 16.4 -7.4 14.6 15.0 13.0Imports 12,198 31.2 -7.0 3.5 11.0 13.0GDP 4.9 9.1 9.7 7.9 8.1Nominal GDP (INRbn) 49,864 55,826 62,082 74,013 84,279 95,304Wholesale prices, % y/y 8.7 2.1 9.5 7.5 5.0Current account, % of GDP -2.5 -2.0 -3.1 -2.5 -2.5General government budget balance, % of GDP -6.0 -6.5 -5.0 -5.5 -5.0* Contribution to GDP growth (% points)30 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 30. ■ BrazilBalancing between excess inflation and ”hard landing”The economy has started to show some signs of slowing Inflation nears the out-of-comfort zonedown. The recent retail sales data point toward slower 8 % y/y % y/y 8consumption growth already in H1, and business surveysindicate deceleration in fixed capital investments growth 6 6as well. That being said, credit growth is still remarkable– at a pace above 20% y/y it is still early to call for anykind of “landing” of the economy, as expansion is still 4 Consumer price inflation 4above historic average rates. And the labour market has Inflation targetstightened further, with unemployment falling to historic 2 2lows of 6.5%.Growth above potential has translated into inflationary 0 0 06 07 08 09 10 11pressures, which have been of concern recently. Headlineinflation has reached the upper limit of the central bank Source: Nordea Markets and Reuters Ecowintarget (6.5%), thus raising the question of monetary pol- Slowdown in consumption from peak growth levelsicy credibility. We believe inflation will rise further to7% in the coming months, thus for some months stayingabove the central bank’s comfort zone. Even if commod-ity prices decelerate, there are signs that core inflationwill accelerate – capacity utilisation levels are at historichighs and the labour market is the tightest ever.The policymakers have employed “macro prudential”measures to curb credit growth, such as taxes on con-sumer credit and foreign investments in bonds. It appearsthat the government has become concerned over a poten-tial slowdown, as seen from the recent decision to reducethe pace of monetary policy tightening. Instead of two fi-nal 50 bp SELIC rate hikes by mid-2011, we thus expectto see a prolonged cycle of 25 bp hikes well into the year. Strong portfolio inflows resumeThe BRL has strengthened in recent months, respondingto strong commodity price momentum. The appeal of oneof the most attractive interest rate levels in the EmergingMarket universe has boosted capital inflows despite themeasures taken. The excessive inflows recently makeBRL particularly vulnerable to sudden increases in riskaversion globally and monetary policy tightening fromthe Fed starting late this year.Aurelija Augulytėaurelija.augulyte@nordea.com +45 3333 6437Brazil: Macroeconomic indicators (% annual real changes unless otherwise noted) 2007 (BRLbn) 2008 2009 2010 2011E 2012EPrivate consumption 1,594 5.7 4.2 7.0 4.8 4.6Government consumption 539 3.1 3.9 4.0 3.0 3.5Gross fixed capital formation 464 13.6 -10.4 26.0 7.0 6.5Stockbuilding* 24 0.9 -2.0 0.2 0.0 0.0Exports 356 0.4 -10.3 10.0 9.0 7.0Imports 315 15.3 -11.5 30.0 13.0 7.0GDP 5.2 -0.7 7.6 4.5 4 .7Nominal GDP (BRLbn) 2,661 3,032 3,257 3,722 4,136 4,556Unemployment rate, % 7.9 8.1 6.7 6.5 6.4Consumer prices, % y/y 5.7 4.9 5.0 6.4 5.2Current account, % of GDP -1.8 -1.5 -2.5 -3.0 -2.8General government budget balance, % of GDP -1.6 -3.2 -2.7 -2.5 -2.0* Contribution to GDP growth (% points)31 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 31. ■ OilPolitical risk in the limelightPolitical unrest in North Africa and the Middle East Oil price forecast – baseline (Brent – USD/barrel)(MENA) and the devastating earthquake/tsunami in Ja- Q1 Q2 Q3 Q4 Yearpan have changed the oil market outlook markedly. 2008 96.3 122.8 117.2 57.5 98.4Mounting political unrest in the MENA region and 2009 45.7 59.9 68.9 75.5 62.5 2010 77.4 79.3 77.0 87.8 80.4Libya’s production outages pushed the “fear premium” 2011E 106.0 115.0 117.0 118.0 114.0and oil prices significantly higher. The “fear premium” 2012E 119.0 119.0 120.0 121.0 119.8has contracted markedly in Q2. From H2 2011 the under-lying oil price trend is again expected to move higher Oil price scenarios – baseline, high and low pricesdriven by tighter fundamentals. Libyan production out-ages have deflated the OPEC supply cushion signifi-cantly and global oil demand is anticipated to outpacenon-OPEC supply growth as world economic growthcontinues to gain momentum.The supply outlook has tightened sharply following therecent development in the MENA region. The region ac-counts for 35% of global oil production, 50% of totalworld oil exports and holds around 60% of the world’sproven oil reserves. Oil’s unique property and low substi-tutability especially as fuel for transportation leaves theworld highly dependent on the MENA region as a persis-tent and secure supplier of oil in future. The recent waveof political unrest has increased the risk of oil supply dis- Top 15 world oil exporters 2009ruptions and scarcity of oil in the world market. Large- 12 12 Mio. barrel/day Mio. barrel/dayscale investments are needed to increase production ca- 10 10pacity from newly discovered areas to compensate fordeclining production from mature fields. Political unrest 8 8and resource nationalism challenge investments in newproduction capacity to meet future demand growth. 6 6Higher oil prices are expected to increase investments of 4 4higher cost oil reserves outside OPEC such as ultra-deepwater production and unconventional resources. 2 2 0 0Future oil demand growth will to a large extent depend RU SA US IR C N C A MX UAE BR KW VE IQ NO NG DZon the impact of continued economic growth, increasing Source: EIAliving standards and population growth in emergingeconomies, especially China, India and the Middle East. Oil price and the marginal cost of a new barrel of oilWe expect that oil demand will continue to grow at a 120 120 USD per barrel USD per barrelhealthy rate in 2011 and then slow down somewhat in2012. The removal of fuel subsidies could reduce oil de- 100 Oil price 100mand significantly and dampen oil prices, but popular 80 80discontent across the Middle East, Latin America andAsia is raising pressure on governments to maintain fuel 60 Marginal cost of 60subsidy programme. The tsunami that hit Japan in March producing a barrel of oil (2011 cost is preliminary)has had a profound impact on the country’s power gen- 40 40eration as a significant share of the country’s nuclear 20 20power generators has been damaged or destroyed. Al-though oil demand is expected to fall in Q2 as oil refiner- 0 0ies have been shut and economic activity slowed, we ex- 92 94 96 98 00 02 04 06 08 10pect a total increase in oil demand as oil will substitute Source: Nordea Markets, IMF and Reuters Ecowinlost nuclear capacity in power generation..Thina M. Saltvedtthina.margrethe.saltvedt@nordea.com +47 2248 799332 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 32. ■ MetalsMetal prices taking a breather at high levelsBase metal markets have experienced a turbulent ride Base metal price forecasts (USD/tonne)since the previous edition of Economic Outlook. Prices Aluminium Copper Nickel Zincgenerally rose in January and continued upwards until 2011E 2,630 9,525 25,460 2,470mid-February when the conflict in Libya escalated and 2012E 2,760 10,000 24,000 2,700sent oil prices sharply up. Since then base metal prices, Source: Nordea Marketswith the exception of energy price-sensitive aluminium, Metal prices close to all-time highshave been under pressure with increased volatility as a 5000 5000result. Index Index 4500 4500 4000 4000On the back of a constructive outlook for oil and energyprices, we believe aluminium prices will be relatively 3500 3500 Metal prices (LME)well supported. We expect demand growth to slow from 3000 3000the record rate of 2010, but to remain above trend in 2500 25002011 and 2012. China is expected to remain the engine of 2000 2000demand growth. Supply capacity is still ample and ex- 1500 1500pected to grow more slowly than demand, thereby in- 1000 1000creasing operating rates. China’s curbs on both energy 500 500use and expansion of production capacity are expected to 00 01 02 03 04 05 06 07 08 09 10 11be supportive of the aluminium market, forcing China to Source: Nordea Markets and Reuters Ecowinbecome a net importer of primary aluminium again. Inour base scenario, prices are expected to average higher Aluminium fundamentals finally improvinglevels over the next couple of years. 6 3500 mio. tonnes SHFE USD per tonne LME 3250We remain fairly bullish on the copper market, as supply 5 LME (cash), rhs 3000growth continues to fall short of demand. Mine supply is 4 2750expected to increase faster amid record-high prices as 2500new projects will come on stream over the next two to 3 2250three years. Risks are nevertheless on the downside formining output. Demand is still expected to outstrip sup- 2 2000ply, but the expected deficit is highly sensitive to global 1750 1GDP growth. We expect prices to stay high and volatile. 1500 0 1250Strong stainless steel production has supported the nickel May Sep Jan May Sep Jan May Sep Jan May Sep Jan 07 08 09 10 11market recently. Demand growth is expected to remain Source: Nordea Markets and Reuters Ecowinrobust, but slow from last year’s rate. In theory, the sup-ply additions announced are plentiful, but the history of Copper fundamentals to remain tightdelays could repeat itself. We believe in a fairly balanced 900 (000) tonnes SHFE USD per tonne 12000market this year and a gradually less tight market over 800 Comex 11000 LMEthe outlook period. Prices are expected to moderate from 700 LME cash, rhs 10000current levels. 600 9000 8000 500Zinc has the weakest current fundamentals of the base 400 7000metals complex, but we expect fundamentals to 6000 300strengthen over the outlook period. Driven by China, 5000 200demand is expected to grow, albeit more slowly than in 4000previous cycles. Mine supply growth is dependent on a 100 3000few large projects which could disappoint. We forecast a 0 2000 07 08 09 10 11market surplus for 2011 which turns into a small deficitnext year. Prices are expected to edge higher over the Source: Nordea Markets and Reuters Ecowinnext couple of years.Bjørnar Tonhaugenbjornar.tonhaugen@nordea.com +47 2248 795933 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 33. ■ 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 Bengt Roström, Senior Analyst anders.matzen@nordea.com, tel. +45 3333 3318 bengt.rostrom@nordea.com, tel. +46 8 614 8378 Anders Svendsen, Chief Analyst Andreas Jonsson, Senior Analyst anders.svendsen@nordea.com, tel. +45 3333 3951 andreas.w.jonsson@nordea.com, +46 8 534 910 88 Troels Theill Eriksen, Senior Analyst Carolinne Bjerking, Junior Analyst troels.theill.eriksen@nordea.com, tel. +45 3333 2448 carolinne.bjerking@nordea.com, tel. +46 8 614 8003 Jan Størup Nielsen, Senior Analyst Hjan.storup.nielsen@nordea.comH, tel. +45 3333 3171 Estonia: Tönu Palm, Chief Analyst Bjarke Roed-Frederiksen, Analyst tonu.palm@nordea.com, tel. +372 628 3345 bjarke.roed-frederiksen@nordea.com, tel. +45 3333 5607 Aurelija Augulyte, Analyst Latvia: aurelija.augulyte@nordea.com, tel. +45 3333 6437 Andris Strazds, Senior Analyst Ianna G. Yordanova, Assistant Analyst andris.strazds@nordea.com, tel. +371 67 096 096 ianna.yordanova@nordea.com, tel. +45 3333 3901 Lithuania: Christine A. Hansen, Assistant Analyst Zygimantas Mauricas, Analyst christine.a.hansen@nordea.com, tel. +45 3333 5115 zygimantas.mauricas@nordea.com, +370 5 2657 198 Thomas Gade, Assistant Analyst thomas.gade@nordea.com, tel. +45 3333 4007 Russia: Georg von Wowern, Assistant Analyst Dmitry A. Savchenko, Analyst georg.von.wowern@nordea.com, tel. +45 3333 6102 dmitry.savchenko@nordea.ru, +7 495 777 34 77 4194 Finland: Martti Nyberg, Chief Economist Finland martti.nyberg@nordea.com, tel. +35 8 9 1655 9941 Pasi Sorjonen, Chief Analyst pasi.sorjonen@nordea.com, tel. +35 8 9 1655 9942 Annika Lindblad, Analyst annika.lindblad@nordea.com, tel. +35 8 9 1655 9940 Norway: Steinar Juel, Chief Economist Norway steinar.juel@nordea.com, tel. +47 2248 6130 Erik Bruce, Chief Analyst erik.bruce@nordea.com, tel. +47 2248 4449 Thina M. Saltvedt, Senior Analyst thina.margrethe.saltvedt@nordea.com, tel. +47 2248 7993 Katrine Godding Boye, Senior Analyst katrine.godding.boye@nordea.com, tel. +47 2248 7977 Bjørnar Tonhaugen, Senior Analyst bjornar.tonhaugen@nordea.com, tel. +47 2248 795934 EKONOMISKA UTSIKTER │MAJ 2011 NORDEA MARKETS
  • 34. Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S.The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the 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

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