Swedbank Economic OutlookSwedbank Analyses the Swedish and Baltic Economies                                               ...
Introduction                                                                                              Swedbank Economi...
Introduction                                                                                         Swedbank Economic Out...
Swedbank Economic OutlookGlobal rough patch – but no meltdownThe worldwide recovery after the finan-              hovering ...
Global                                                                                                                    ...
Global                                                                                                     Swedbank Econom...
Global                                                                                                                    ...
Global                                                                                                 Swedbank Economic O...
Global                                                                                                        Swedbank Eco...
Global                                                                                                  Swedbank Economic ...
Global                                                                                                                    ...
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
Swedbank Economic Outlook January 2012
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Swedbank Economic Outlook January 2012

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Swedbank Economic Outlook January 2012: When the going gets tough, the tough get going

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  1. 1. Swedbank Economic OutlookSwedbank Analyses the Swedish and Baltic Economies January 24, 2012When the going gets tough, the tough get going Global development Table of Content:  The global recovery is losing steam with the euro zone in a recession and the US only slowly gaining speed. Global growth – estimated at 3.6% last year – was driven by emerging markets. We have revised the growth rate to 3.1% in Introduction: Weak growth – 2012 and 2013, from October’s 3.6% and 3.7%. negative risks weigh heavily 2  Global growth relies on the euro zone’s policy response. Our main scenario (55% probability), foresees small steps of progress but high short-term mar- Global: Rough patch – but ket volatility. A worsening (40% probability) nearly stalls global growth. A euro collapse has a small probability of 5% but with much larger negative growth no meltdown 4 effects. Sweden Sweden: Challenging times  After strong growth for most of 2011, macroeconomic indicators now suggest ahead 12 that the Swedish economy is slowing significantly. Exports are receding, indus- trial production is stagnating, and labour market improvements are slowing. Estonia: Shifting from high  Growth is revised downwards to 0.6% for 2012 and 1.8% for 2013 as the deep- ening euro zone crisis will continue to negatively affect the Swedish economy. to lower gear 17 Worsening sentiments of both households and companies will strain consump- tion and dampen investments. We expect unemployment to start to rise in 2012, Latvia: Holding up better before slowly falling back in 2013, as economic growth picks up moderately. this time 21 Estonia  Estonian economic growth was very strong in 2011, supported by better-than- expected export growth, albeit the pickup in domestic demand was solid as Lithuania: Growth in spite well. Strong foreign demand boosted investments and job creation. Rising em- of fiscal consolidation 25 ployment (8% up to third quarter) and wages supported private consumption.  Despite a worse global outlook, Estonia is estimated to grow by 2.7% in 2012 and 4.0% in 2013, fostered by domestic demand – investments are supported by growing public sector and environment-related investments; private con- sumption by the improving labour market situation and easing inflation. Latvia  In 2011, economic growth was stronger than expected, boosted by export- ing sectors and their investments, as well as by household consumption. We estimate that GDP growth exceeded 5%. The IMF/EC-supported bailout pro- gramme was successfully completed in December.  We are lowering the 2012 growth forecast to 2.0%, as slower growth for the main trading partners will cut into Latvian exports, while weaker confidence will dampen consumption and investments. We anticipate growth to pick up again in 2013, reaching 3.2%. Euro adoption in 2014 is still our main scenario. Lithuania  Consumption and investments continued fuelling GDP growth last year, when the economy expanded by an estimated 6.3%. Unemployment declined by al- most 3 percentage points, but real wage growth was still negative. Annual infla- tion peaked in May and was 3.4% at the end of 2011.  Growth will decrease in 2012 and 2013, but the economy is not expected to be in recession. The economy will continue to be driven by domestic demand, especially investments. This year, inflation is expected to decelerate to 2.5% and the budget deficit will contract from more than 5% of GDP in 2011 to 3% in 2012. Uncertainty has increased, but euro adoption in 2014 is still possible. January 24, 2012 1
  2. 2. Introduction Swedbank Economic OutlookWeak growth – negative risks weigh heavilyThe economic recovery in Sweden and slower speed. Sweden faces a couple advanced economies would have beenthe Baltic countries was strong up to of quarters of negative growth, thus in used up. The Baltic economies wouldthe third quarter last year, and labour technical terms falling into recession, also shrink, but their recessions wouldmarkets improved accordingly. Due to but would be able to sustain growth for be much milder than the ones experi-weaker global developments, especial- the whole year of 2012, and even more enced in 2008-2009, since imbalancesly in the euro zone, all four economies so in 2013. The Baltic countries stag- have been reduced and reforms havehave now shifted to a lower gear. We nate in the short term, but will see posi- been implemented to strengthen com-expect GDP growth to dampen during tive annual growth both in 2012 and petitiveness.the first half of 2012 and pick up only 2013. The probability of this scenario is In our main scenario, global growth fallsmildly thereafter. Hence, in Sweden relatively low (55%), thus pointing to a to 3.1% in 2012 and 2013, from 5.1%and the Baltic countries we still foresee great uncertainty about an outlook that in 2010 and 3.6% in 2011. GDP growthslight positive growth on an annual ba- is mainly dependent on policymakers’ in the US economy has been revisedsis, although the risks weigh heavily on reform ambitions and commitment to upwards to a moderate 2.0% in 2012the downside. save the euro zone. but downwards in 2013 to 2.2%, sinceIt is the global outlook that mainly cre- If our main euro zone scenario is rather deleveraging continues. The euro zoneates the uncertainty in our forecast. We downbeat, our alternative scenarios are economy shrinks by 0.3% this year, andsee three scenarios for the euro zone even more negative. The most likely of growth will be only marginally positive incrisis, which then set the stage for our them – with a probability as high as 40% 2013. Hence, there will be two years ofglobal scenarios. Our main scenario – is a continually worsening situation lost economic development for the euroforesees a volatile spring but is more with falling confidence and rising risk zone. The UK will also grow at a near-optimistic on the possibilities of confi- premiums, making government and stagnation rate, struggling with fiscaldence improving near autumn, when bank funding more difficult. The global consolidation and – on a political notethe new support mechanism, the Eu- economy’s growth would then come – relations with the euro zone. Japan isropean Stability Mechanism (ESM), is close to recession, and growth in recovering from last year’s tsunami, butin place and banks are better capital- Sweden and the Baltic countries would not at the speed first envisaged. Slowerised. During the spring, policymakers be more negative and stay so longer, global growth and a strong yen are rais-are expected to take decisions that will postponing the recovery until towards ing the hurdles.strengthen institutions, and this scenar- the end of the forecast period at best. China’s export sector is slowing, al-io thus presupposes small but crucial The likelihood of an even worse sce- though domestic consumption is ex-steps of policy improvement. nario – in which the euro zone breaks pected to stay awake with lower taxes,Even so, there will be a recession in up during our forecast period – is low lower inflation, and higher wages. Wethe euro zone driven by fiscal auster- (5%) but the negative impact on the foresee that there is room for stimulus,ity, credit crunch and lower confidence, euro zone, and the global economy as inflation is coming down to morebut the global economy will be able would be substantial. Sweden’s GDP palatable levels, although the amountto avoid it, as emerging markets and would shrink as it did in 2008-2009, or of stimulus will fall short of the vastthe US continue to recover, albeit at a even worse, as the policy tools in the support given in 2008-2009. Growth in India, Brazil, and Russia will also slow, although these countries, together withMacro economic indicators, 2010- 2013 2010 2011e 2012f 2013f many other emerging economies, will Real GDP growth, annual change in % support global growth through the con- Sweden (calender adjusted) 5.3 4.5 0.6 1.8 tinuation of their catching up of living Estonia 2.3 8.0 2.7 4.0 Latvia -0.3 5.4 2.0 3.2 standards. This is in contrast to most Lithuania 1.4 6.3 3.3 4.0 advanced economies, whose fiscal Unemployment rate, % of labour force stances and credit policies will be crip- Sweden 8.4 7.5 7.8 8.0 Estonia 16.9 12.5 10.7 8.6 pled by high debt and austerity. Latvia 18.7 15.4 13.7 12.0 Lithuania 17.8 15.5 13.5 11.5 Commodity prices will fall during the Consumer price index, annual change in % forecast period, as global demand Sweden 1.2 3.0 1.5 1.7 abates. The oil price – for which risks Estonia 3.0 5.0 3.2 3.0 are building up in relation to EU embar- Latvia -1.1 4.4 2.4 2.5 Lithuania 1.3 4.1 2.5 3.0 go of Iranian oil – is expected to drop Current account, % of GDP from last year’s $112 per barrel to $102 Sweden 6.2 7.5 7.7 7.3 this year, and $96 in 2013. Food and Estonia 7.2 6.7 4.4 2.7 Latvia 3.0 -0.9 -1.8 -1.9 metal markets will also on average see Lithuania 1.5 -2.0 -2.5 -2.7 prices decrease in 2012 and then sta- Sources: National statistics authorities and Swedbank. January 24, 2012 2
  3. 3. Introduction Swedbank Economic Outlookbilise in 2013. This means that inflation be positive, reaching 0.6% in calendar- fore picking up to 3.2% in 2013, whenpressures are coming down, thereby adjusted terms, before picking up to the euro zone situation improves some-allowing for a more expansionary mon- 1.8% in 2013. The Riksbank will cut its what. Unemployment will continue toetary policy, especially in emerging policy rate to 1% towards the end of fall, reaching 12% in 2013, and inflationmarkets, where there is room. In most 2012, while the government will reject will also drift downwards to 2.5%. Theadvanced economies, policy interest demands for further stimulus unless the main domestic forecast risks are house-rates will stay low or near zero, being situation worsens markedly. hold resilience, and politicians’ commit-raised only towards the end of 2013. ment to further budget consolidation. Estonia’s economy is forecast to haveMore quantitative and/or credit eas- Although the euro adoption target for grown by a respectable 8% last year,ing is foreseen in the UK and Japan, 2014 remains on the Latvian political supported both by stronger exports andbut not in the US unless its recovery agenda, the euro zone’s ability to ac- a pickup in domestic demand. The ef-slows. In the euro zone, the ECB is cept new members may be obstructed fect on the labour market has beenforeseen as cutting the repurchase rate by the recession and debt crisis. positive, with a substantial drop in un-to 0.75%, and as providing more liquid- employment to 12.5% on average in Lithuania’s GDP growth seems to haveity, if needed, to calm financial markets. 2011 from almost 17% the year before. been in accordance with our earlier ex-The US dollar is expected to strengthen Going forward, exports and invest- pectations, as it is estimated to haveagainst the euro during 2012, and then ments will lose steam, as the demand reached 6.3% last year. The exportto weaken somewhat. The euro will de- from the rest of Europe dampens. sector and domestic demand drove thepreciate, thus providing some stimulus Growth will slow to 2.7% this year and recovery, although, as in Latvia, net ex-to the export industry. The yen is also then return to a higher rate in 2013 of ports actually contributed negatively toseen as weakening against the dollar, 4.0%. Although revised upwards, the growth. We expect lower export growthnot least since Japan’s trade balance is inflation rate is set to slow compared ahead, as demand from Lithuania’sworsening. And the Chinese renminbi with last year, and the unemployment main export markets will dampen. In-will continue to appreciate against the rate is expected to decrease to 8.6% vestments will continue to grow rela-dollar, unless exports hit the wall and in 2013. The main domestic risk is the tively fast because they remain nearthe Chinese administration once again labour market, since there is a short- historical lows, the demand for busi-looks for ways of stimulating the econ- age of skilled labour in some sectors; ness investment is still high, and largeomy. meanwhile, long-term unemployment EU funds are still available. House-Sweden’s GDP is estimated to have remains a structural problem. holds will benefit from unemployment’sincreased by 4.5% last year, continu- coming down to 11.5% next year from Latvia’s economy also grew faster thaning its strong development in 2010. Af- 15.5% in 2011, and from inflation’s fall- expected in 2011, as GDP is estimatedter three quarters of brisk growth, the ing to 2.5% this year, before rising again to have grown by 5.4%. Stronger ex-economy is seen to have shrunk in the in 2013. Even so, private consumption ports pushed up investments, and, asfourth quarter. With a contraction also growth is set to decrease. Domestic the labour market improved, reducingin this year’s first quarter, Sweden’s risks include a stronger need for budget unemployment from almost 19% ineconomy is technically in recession. consolidation as the economy slows, as 2010 to 15.4% in 2011, confidence andIn particular, exports are decreasing, well as the outlook for euro adoption, household consumption strengthened.and household spending growth is be- which has become more uncertain. The IMF/EC-supported bailout pro-ing held back by low confidence and gramme was successfully completed The outlook for the advanced econo-expectations of higher unemployment. in late 2011. Going forward, a global mies looks bleak for the next couple ofAs the economy recovers due to better slowdown and euro zone recession will years, and their fiscal challenges areexport possibilities, hitherto favourable dampen Latvia’s growth prospects, as substantial also from the longer termunit labour costs, and lower interest GDP growth slows to 2.0% in 2012 be- perspective. Without structural policiesrates, overall annual growth in 2012 will to enhance growth, Sweden’s and the Baltic countries’ main export markets Gross domestic product (annual growth in %) will – with some exceptions – develop 15 weakly for many years to come. The 10 Estonia need to step up export diversification, 5 Euro zone i.e., focus more on the emerging mar- Lithuania kets, is increasing. To remain competi- 0 Latvia tive, it will be crucial to put more weight -5 Sweden on R&D, supporting our regional clus- -10 ters of excellence. -15 -20 Cecilia Hermansson -25 2006 2007 2008 2009 2010 2011 Source: Ecowin January 24, 2012 3
  4. 4. Swedbank Economic OutlookGlobal rough patch – but no meltdownThe worldwide recovery after the finan- hovering around 50 – these indicate no selling assets, and to buffer more capi-cial crisis and the global recession in growth or shrinking industrial produc- tal and become more cautious about2008-2009 slowed during the autumn tion. The OECD’s leading indicator sig- onward lending to other banks, compa-of 2011. Growth in GDP, industrial pro- nals a recession, mainly due to falling nies, and households. Interbank inter-duction, and exports dampened, es- new orders and more negative finan- est rates have risen in the euro zone,pecially in the euro zone, as well as in cial market statistics. In line with these and banks are depositing more fundsmany of the emerging markets, such as soft data, hard data on the outcome of overnight at the central bank, the ECB.China, India, and Brazil. In the US, on global trade have shown stagnation at The vicious circle involving the debt cri-the contrary, economic growth picked best. sis in the euro zone, budget consolida-up after a disappointingly weak first half The most obvious deterioration during tion, and the fragile banking system isof the year. the autumn can be found in the increas- at the forefront of the crisis. The resultThe main reasons for the world econo- ingly negative confidence indicators, as at the moment is austerity in public fi-my’s shifting to a lower gear have been well as in the more severe stress on nance as well as credit markets, caus-economic, political, and psychological. financial markets. The main reason for ing demand to shrink and the risks of aAs the financial crisis has changed its the lower confidence is the public debt more severe recession to increase.focus from private to public debt, politi- crises in the US, UK, and – especially – Although the US, UK, and Japan arecal decisions on how to handle budget the euro zone. facing serious difficulties in even-high-deficits, austerity programs, and re- Downward revisions of credit ratings er budget deficits and increasing pub-forms have been more difficult to agree for banks and countries, falling bank lic debt, the financial markets trust thatupon. This has been true in the US as shares, widening spreads on contracts these countries will be able to handlewell as in the UK, and especially so in for credit default swaps (CDSs) and the challenges in the short to mediumthe euro zone, where one political sum- government bonds for the crisis-struck term. In the euro zone, on the othermit after another has claimed – without countries Greece, Portugal, and, in- hand, financial markets are demandingsubstantiation – to have come up with creasingly so, for Spain and Italy – all very high risk premiums for countriescredible solutions. However, financial these signal rising concern about a where default risks have increased. Inmarket actors, companies, and house- default on government debt and also, addition, while the debt crisis there hasholds have lost confidence in the future, even more so, about the politicians’ de- coincided with the building up of strong-thereby helping to worsen the outlook mands for private sector involvement. er institutions to manage the currencyfor financial conditions, investments, In addition, the requirements for banks union, these institutions are at the mo-and consumption. to increase capital adequacy as early ment not capable of handling defaultNotable are the low purchasing man- as June this year also increases the risks within an EMU context. Instead,agers’ indices (PMIs) in most countries stress on the financial system, causing there have been attempts to find sup-during the second half of last year – banks to shrink their balance sheets by port elsewhere, such as from the IMF, emerging markets, and other non-EMUGlobal GDP outlook 2010 - 2013 (annual percentage change) 1/ countries. January 2012 October 2011 The challenges for the currency union 2010 2011 2012 2013 2011 2012 2013 are linked to the lack of fiscal coordi- nation/cooperation, the inclination ofUS 3.0 1.8 2.0 2.2 1.6 1.9 2.4EMU countries 1.8 1.6 -0.3 0.2 1.6 0.8 1.2 countries to take a national responseOf which: Germany 3.7 3.0 0.4 0.9 2.9 1.1 1.5 to banking regulation instead of ap- France 1.4 1.6 0.2 0.5 1.4 1.2 1.4 pointing a sole banking regulation for Italy 1.2 0.5 -1.3 -0.8 0.6 0.3 0.8 the euro zone, and the divergence in Spain -0.1 0.6 -1.0 -0.5 0.6 0.4 1.0 growth, labor participation, and com-UK 1.8 0.9 0.5 0.5 1.1 1.2 1.7 petitiveness between the North and theJapan 4.5 -0.5 1.7 0.9 -0.2 2.5 1.2 South in the euro zone.China 10.3 9.3 8.2 7.8 9.0 8.4 8.0 Three scenarios for the euroIndia 10.1 7.3 6.7 7.0 7.7 7.5 7.5 zone set the global stageBrazil 7.5 3.0 2.7 2.2 3.7 4.0 4.3 Since the global economic outlook isRussia 4.0 4.2 3.9 3.7 4.5 4.2 4.5 so dependent now on political and psy-Global GDP in PPP 5.1 3.6 3.1 3.1 3.6 3.6 3.7 chological factors in, especially, theGlobal GDP in US$ 4.1 2.7 2.3 2.3 2.7 2.8 2.9 euro zone, we have built our globalSources: National statistics and Swedbank. scenarios on the basis of probabilities1/ Countries representing around 70 % of the global economy. The World Bank weights from 2010 have for three different outcomes in the eurobeen used. January 24, 2012 4
  5. 5. Global Swedbank Economic Outlookzone. Notable is the great uncertainty Structural defict 2011, necessary fiscal adjustment, and itssurrounding the outlook, as evidenced impact on growth 10by the rather even chances for the 8main scenario and worse outcomes. 6Our probabilities are only broad guide-lines designed to make clear what the 4 Percent of GDP Structural def icitassumptions are, and should not be 2 Adjustmentseen as having been constructed in a 0 Growth impactscientific or rigorous manner. -2 -41. Main scenario: some small positivesteps towards improvement in the euro -6zone and subsequently a global slow- -8down in which recessions are limited to -10 Sources: Finland Germany Italy Eurozone France Portugal Spain Greece Ireland EU commission andcrisis-struck countries in the euro zone Swedbank(55%)The main arguments for a more op- Mechanism (ESM) to July this year, with However, even if the crisis in the eurotimistic view on the euro zone can be an effective lending capacity of €500 zone does not worsen during 2012 (es-linked to the agreements made at the billion, and in dropping the reference to pecially in the second half of the year,most recent EU Summit, the measures future private sector involvement and as we see room for volatility and back-taken by the ECB, and the increased deciding on voting procedures that will lashes in the first half), the effects onpace of reform and consolidation in the allow lending decisions to be taken on growth will be massive, as the budgetcrisis-struck countries. the basis of a qualified majority of 85%. consolidation measures will dampen These initiatives strengthen the stability demand, especially in the crisis-struckAt the EU Summit, on December 9, an mechanism, as the current European countries, but also in the rest of Europeagreement was reached on stronger Financial Stability Facility (EFSF) has and globally as well. Also, the creditfiscal cooperation, or a fiscal compact. been seen as both inadequate in size crunch will be negative for growth.Countries are required to limit their and too fragile in its setup. There is alsostructural budget deficits to 0.5% of Therefore, our main scenario includes a possibility that additional resourcesGDP, and public debt ratios to 60% of recessions in the countries where ad- will be supplied to the IMF by nationalGDP, otherwise semi-automatic sanc- justment is the largest, and low growth banks in the euro zone and other EUtions set in. This is allowing the ECB to or stagnation in other parts of Europe. countries.play a larger role in the short term, as Global growth will slow, but not as se-the bank now provides unlimited liquid- There are other indications that the cri- verely as if the euro zone crisis hadity for banks with three-year fixed-rate sis may become less contagious. The worsened. Emerging markets will con-loans at 1%, in addition to loosening up technocratic governments in Greece tinue to grow, but somewhat more slow-its collateral policies. and Italy, as well as the new govern- ly than during 2010 and 2011, and the ments in Spain, Portugal, and Ireland, US will start to see a more robust re-These measures are thereby directly are moving forward with their consolida- covery, although at a slower pace thansupporting banks in their efforts to in- tion and reform measures. In addition, during most other recession recoveries.crease their capital adequacy through even if Italy’s interest rates were to be Overall, global growth will reach justimproved profitability, thus potentially al- 7% or above, it would take years for the above 3% during 2012 and 2013 in pur-leviating the credit crunch; indirect sup- debt-service costs to cause a collapse chasing power parity (PPP)-weightedport is also being given to governments since Italy’s debt stock has a relatively terms.since the additional funds, in turn, are long maturity (about seven years).likely to be invested in sovereign bonds. 2. Worse scenario: gradual deteriora-In addition, the ECB still has room to Increasingly, reforms will be designed tion in the euro zone, as in 2011, withcontinue to purchase bonds in the Se- to support growth, thereby facilitating lower confidence and increased finan-curities Markets Programme (SMP), the deleveraging of public debt. Finan- cial stress – and with demands for larg-thereby indirectly absorbing some of cial markets will also gain confidence in er policy responses – leading to deepthe new supply from Spain and Italy. the decisions to remove private sector recession in the euro zone and muchAll in all, the ECB’s interventions are involvement; this combined with a bet- weaker global demand (40%)becoming sizable despite the bank’s re- ter understanding of the differences There are still extensive risks to thesistance to monetary financing of sov- between the economic strengths of brighter scenario described above, asereign debt and its stated adherence to Italy, France, and Spain, on the one financial markets may not be convincedthe terms of the EU Treaty. hand, and the economic weaknesses of that the measures agreed upon are suf- Greece, on the other, will help containAn important step was also taken in ficient. First, there are risks concerning the spread of the crisis, going forward.bringing forward the European Stability the details with regard to the measures January 24, 2012 5
  6. 6. Global Swedbank Economic Outlookthat will be settled in March this year. of private sector involvement may not 3. Chaotic scenario: breaking up of theNot all national parliaments may go succeed, thus increasing the risk for a euro zone with severe stress on finan-along with the agreement reached at default in March. Even if Greece is not cial markets and global recession asthe summit in December. Backlashes forced to leave the euro zone as a re- outcome (5%)may occur, as financial markets find out sult, the contagion to other countries The reasons for the relatively low prob-that the measures will be less reassur- could rise, meaning that the crisis again ability of a breakup the euro zone areing than hoped. escalates. In addition, there are great that there is a strong political will to uncertainties with regard to Greece’sSecond, even if private sector involve- keep the currency union together, and commitment to fulfill the conditions setment is taken off the table, except in that the costs of a breakup would far up in the reform program, as implemen-Greece, financial markets may not be exceed the costs of a rescue. tation so far has been very slow.able to fully believe this will hold; thus, Even so, the probability is not 0 %. De-interest rate spreads will remain high. Also, the spread of the crisis from the spite support mechanisms provided byThird, the effects of Standard and periphery to the core countries could the EFSF, ESM, IMF, and ECB, therePoor’s decision to downgrade 9 of the still continue during 2012 and 2013, is a risk that politicians and their voterseuro zone countries may have more se- increasing the need to take measures, in stronger member countries no longervere economic effects than so far not- such as more support from the ECB, want to show solidarity with the weakered. In addition, the effects of the down- transfers to the IMF, and an enlarge- ones, or that the politicians and theirgrading of the EFSF could become ment of the ESM. The large issuance voters in the crisis-struck countries nomore crucial, especially if the ESM is of debt during 2012 of some €2,000 longer want to adhere to the condition-not brought forward to July this year. billion will cause stress, especially for ality that comes with the support.If financing costs increase as a result Italy and Spain during the first half ofof the downgrading, as well as to simi- this year. If a crisis-struck country like Greece de-lar decisions by other rating institutes, cided to not comply with the conditions In this scenario, the politicians andthe outlook for the real economy could set for support, public sector and finan- other policymakers continue “kickingworsen. cial sector insolvency could lead it to the can down the road.” They manage the drastic decision to leave the curren-Fourth, the agreements made on the to keep the currency union together cy union. The costs involved would befiscal compact will speed up the budget during 2012 and 2013, but the effects enormous: the government would shutconsolidation, especially after our fore- on financing costs, financial markets’ down, the banking sector would face acast horizon of 2014 and onwards. stress, confidence, and demand will be systemic crisis, with bank runs, capitalEuro zone members will have to build more negative, thus also contributing to flight, credit crunch, and nationalisa-up larger primary surpluses in order a faster slowdown of global growth than tion as a result, private wealth would beto reach the debt ratio of 60% of GDP in our main scenario. hurt, confidence would fall, a recessionin some 20 years, as seems to be the The recovery in the US will be fragile, would set in, and the government wouldgoal. If reforms are not undertaken to and emerging markets will have diffi- have to start adjusting fiscal balancesincrease growth, competitiveness, and culties in keeping up their exports and by tightening despite the depreciationlabour market participation, the outlook subsequently also their domestic de- of the new currency by some 40-60%for the euro zone worsens and stagna- mand. Global growth will reach at best compared with the euro. Even with thetion can be expected at best in the short only 2%: the dividing line between glo- lower value of the new currency, theand medium term. bal growth and global recession. export outlook (including for the tour-Moreover, the likelihood for deflation ism sector) would be hampered by theand new recessions will increase in credit crunch and the falling confidence,combination with political and social un-rest. The financial markets may not find Interest rate diffence vs. Germany (10y government bond)the agreements made to be credible 35in the sense that debt problems could 30worsen, and the growth outlook will bevery bleak. In addition, the divergence 25 Greecebetween the North and the South may Portugal Percentage points 20 Irelandwiden as a result, thus driving expec- Italytations that the currency union may 15 Spainnot hold together in the medium term, 10 Belgiumwhich, in turn, would affect the short- Franceterm view. 5 0Of great importance is the handling ofthe crisis in Greece. The negotiation -5 2007 2008 2009 2010 2011 Source: Ecowin January 24, 2012 6
  7. 7. Global Swedbank Economic OutlookOECD industrial production and leading indicators; and global ment for most OECD countries in eitherexports the short or medium term. 15 190 The drivers of the main scenario are 10 170 the fiscal austerity packages in the OECD industrialAnnual percentage change 5 150 production euro zone, the lower confidence, and the credit crunch, as well as the rise in Index 0 130 OECD leading indicators unemployment, all of which are lead- -5 110 ing to lower demand growth, which Global export volume (rhs) will spread to other regions as well. In -10 90 the euro zone, the need for austerity -15 70 amounts to 3.3% of GDP – the level re- quired in order for countries on average -20 50 to reach a structural deficit of 0.5% of 1995 1996 1998 2000 2002 2003 2005 2007 2009 2010 Source: Ecowin GDP. This would mean some 1.7% of GDP in negative growth effect, perhaps spread out over two years (see Chartas generated political and social unrest. this time it would be more difficult to on page 5). In the US, the fiscal stimu-Most likely, the depreciation of the cur- overcome the problems since the room lus is decreasing compared with 2010rency would lead to higher inflation. for massive monetary and fiscal stimu- and 2011, but more extensive austerity lus is no longer there.For countries remaining in the euro will be postponed to 2014 and beyond.zone, the risk of financial market con- Global growth would most likely be Both the labour market and the housingtagion would be high, although the ef- negative in this scenario since the euro market are starting to recover, althoughfects on the real economy would be zone is heavily linked to the rest of the slowly.small due to the relatively small size world through financial markets and The weaker demand will also driveof Greece (compared with what would trade; moreover, since the recession commodity prices lower. Since emerg-happen if, e.g., Spain and Italy left would again be characterised as a bal- ing markets will grow relatively quickly,the EMU). The strains on the banking ance sheet recession, the recovery pe- although slower than in the past twosystem in the euro zone would be the riod would be slow and prolonged. The years, the demand for commoditieslargest problem, but falling confidence long-term costs of a breakup would be will stay rather high. We foresee thethrough fear and negative wealth ef- large as well, as EU cooperation would oil price per barrel falling from $112fects would also lower demand in the be affected through the poorer function- in 2011 to $102 in 2012 and to $96 inremaining euro zone countries, as well ing of the single market, and the outlook 2013. Also, metal and food prices willas in other parts of the world, depend- for Europe from a global competitive- fall during 2012 and then stabilise ining on the size of the country/countries ness perspective would be less benign. 2013. There are many risks involved,leaving the EMU. Main features driving the global such as Iran’s threatening to cut off theIf any or a few of the stronger euro zone outlook in our main scenario supply of oil from the Strait of Hormuzmembers decided to leave the currency We find the scenario of small steps to- following EU oil embargo, leading to aunion, the appreciation of the new cur- wards improvement in the euro zone higher oil price than we assume here.rency would lead to lower competitive- most likely, although the risks for a All in all, however, commodity pricesness and a loss of jobs in the export worse scenario are very high. In the will face downward pressure as the glo-sector, weaker public finance, and an longer term, the risk of a breakup of bal slowdown accentuates.increased need for bank recapitalisa- the euro is higher than 5%, unless in- Inflation will therefore abate this year,tion. Countries remaining in the euro stitutions are strengthened sufficiently compared with the relatively high pricezone would face problems involving in order to enhance growth and com- increases during 2011, not least in thecapital flight, the decreased potential petitiveness and to facilitate the con- emerging markets. This opens up roomfor support through the EFSF/ESM, fall- vergence of developments in euro zone for a looser monetary policy in emerg-ing confidence, and expectations that countries. ing markets, as well as in the euro zone,the remaining countries would leave The slowdown of GDP growth from where the ECB will be able to cut policythe union as well. some 5% in 2010 and 3.6% in 2011 to interest rates further. Also, in advancedThe effects on the European econo- just above 3 % in 2012 and 2013 rep- countries where policy rates have beenmies and the global economy would resents a shift to a lower gear, thus raised, there is room for a more expan-be severe in the context of a breakup, leading to a worsening outlook for la- sionary monetary policy, limiting theeven if it did not happen overnight. The bour markets and household income in downturn in the business cycle. In therisk of a repeat of the standstill in the many countries. This outlook will also US, another round of quantitative eas-credit markets, as occurred during the make budget consolidation more dif- ing cannot be excluded, but in our mainautumn of 2008, would be large, and ficult to achieve, a necessary require- scenario the need for this may be de- January 24, 2012 7
  8. 8. Global Swedbank Economic OutlookInterest rate and exchange rate assumptions southern part of Europe and Ireland are Outcome Forecast 20 Jan 30 Jun 31 Dec 30 Jun 31 Dec much worse, as these economies are 2012 2012 2012 2013 2013 shrinking due to fiscal and credit aus- Policy rates terity, high (youth)unemployment, and Federal Reserve, USA 0.25 0.25 0.25 0.25 0.75 weak confidence. The result is lower European Central Bank 1.00 0.75 0.75 0.75 1.00 consumer spending, postponements of Bank of England 0.50 0.50 0.50 0.50 1.00 investment, and more bankruptcies in Bank of Japan 0.10 0.10 0.10 0.10 0.10 both the nonfinancial and the financial Exchange rates sector. EUR/USD 1.29 1.20 1.25 1.30 1.30 USD/RMB 6.34 6.18 6.05 5.94 5.82 The economic outlook will get worse USD/JPY 77 78 80 82 85 before it gets better, and we expect the euro zone to remain in recession dur- Sources: Reuters Ecowin and Swedbank. ing the first half of this year, before im-creasing. Still, there and in other OECD During 2012, the presidential election is proving slightly and becoming stagnantcountries policy rates will remain low or in focus. Difficulties in reaching agree- during most of 2012 and 2013. GDP inclose to 0% during the forecast period ment on the Republican candidate, as the euro zone is expected to decreasedue to the restrictive fiscal policy; not well as an improvement in labour and by 0.3% in 2012, before returning tountil towards the end of or beyond 2013 housing, increase President Obama’s positive territory, at 0.2%, in 2013. Thiswill rates start to be raised. chances of reelection. During 2013, the means two lost years for the euro zone fiscal gridlock will accentuate regard- during our forecast period. GermanyIn a climate of few policy tools and less of which party wins the election. will also technically be in recession asweaker domestic demand, countries The lack of trust among the members of GDP most likely fell fourth quarter lastwill not like to see their exchange rates congress partly explains their unwilling- year and the first quarter this year, al-appreciate substantially, as exports will ness to find compromises, a situation though a stronger labour market, bet-remain the most important source of that does not have to improve after the ter competitiveness and lower inflation/recovery. China has declared that the election unless leadership (and “follow- weaker euro will support the recoveryrenminbi will be allowed to appreciate ership”) strengthens. occurring in the second half of 2012.somewhat faster against the dollar,the US may see the dollar strengthen There is a risk that tax cuts and unem- As we see some improvements in theagainst the euro with its more robust re- ployment benefits will not be extended policy process directed towards cri-covery, and the yen is likely to weaken beyond the two months already agreed, sis management and the longer-termas Japan’s trade balance deteriorates. thus creating an unnecessarily restric- building of stronger monetary union tive fiscal policy during the forecast pe- institutions, we do not foresee a dis-Developments in major orderly default and exit of Greece riod, as well as a more negative GDPeconomies from the euro zone, nor do we expect outlook than we have forecast. AnotherUS risk is, of course, the outlook in the more countries to need a restructuringAlthough the momentum in the US euro zone, which, due to the increased of debt besides the ones already witheconomy has become more positive squeeze on US credit markets, as well IMF/ECB/EU-supported programmeslately, as shown by, inter alia, GDP as lower exports and confidence, could (Greece, Ireland, and Portugal).growth and PMI figures, fundamental lead to slower growth in the US also. Italy and Spain are favoured by thechallenges remain, such as the on- The Federal Reserve will maintain its new rules and measures decided at thegoing deleveraging and great fiscal zero-interest-rate policy during most of EU summit at the end of last year. Theuncertainties, which continue to hold the forecasting period; it will use more amount of new bonds needed to be is-down households’ and companies’ con- quantitative easing only if growth falls sued for these two countries is €450fidence. In addition, despite improve- below 2%, if deflation risks are building billion in 2012 – €150 billion in thements, the labour and housing markets up, or if fiscal policy becomes more re- first quarter alone. Since the introduc-are still a drag on the economy. strictive, thus risking the occurrence of tion of the three-year fixed- rate loans, a new recession. yields in the shorter maturities haveWe have revised our forecast upwardsfor 2011 and 2012 to 1.8 % and 2.0 % Euro zone decreased substantially; this improvesrespectively, but are still sceptical about the funding situation for these countries The euro zone is already experienc-the longer-term outlook, which includes and reduces the need for further ECB ing negative growth on a quarterly ba-a slight downward revision for 2013. government bond purchases on the sis, including in Germany and France,Without structural reforms creating secondary markets. where conditions for manufacturingstronger impetus for higher demand, and retail worsened towards the end The spread of the crisis to the core ofthe trend growth is likely to stay just of last year. However, developments the euro zone will also abate in ourabove 2% going forward. in the crisis-struck economies in the main scenario, thus resulting in high, January 24, 2012 8
  9. 9. Global Swedbank Economic Outlookbut not very much higher, financing beat) scenario. Other risks to the euro addition, the strong yen and the morecosts of sovereign debt. zone include political developments, as negative global outlook are dampening Finland, France and Greece face elec- Japanese export possibilities. AlmostDue to the shrinking of balance sheets tions this spring, and the momentum of half of Japan’s exports are directed toin the banking sector, we expect the reforms and budget consolidation could the US and the euro zone, and lowerfinancing costs of private debt to rise be interrupted (the French Socialist demand from China will also affectfurther, and the availability of credit to candidate Hollande would like to rene- some 7% of exports. The current ac-diminish. Especially during the first gotiate the fiscal compact if elected). count surplus decreased by almosthalf of 2012, before the recapitalisation The outlook for emerging markets is 50% in the first half of the 2011 fiscalof banks has been finalised, and while also a risk, and if demand slows more year, compared with the same period inbanks/countries are still faced with fall- than expected, the export outlook for 2010. The earthquake is an importanting bank shares and the downgrading the euro zone will worsen substantially. explanation, but so is the increasinglyof credit ratings, financial developments This risk is higher for Ireland and Ger- weaker competitiveness. The strivingare likely to worsen before improving many, where exports to the world as a to take part in the Trans-Pacific Part-in the second half of the year. share of in GDP are 54% and 36%, re- nership, as well as to improve foreignAfter decisions on budget rules have spectively, and the share of euro zone exchange and trade cooperation withbeen taken in March at the latest, the exports is 22% and 15%. A weakening China, should be seen as measuresESM has been put in place in mid-2012, of the euro could have a positive impact that need to be taken to improve tradeand the recapitalisation of banks has on the growth outlook for the euro zone relations.been finalised (although the Basel III through better exporting possibilities – The stronger yen, fundamentally weakrules will demand further actions), the important not least for the crisis-struck demand, and lower global commoditypolicy focus is likely to move to struc- countries in southern Europe, where prices will cause deflation during mosttural reforms and measures to increase competitiveness is weaker. of the forecast period. The Bank of Ja-growth and competitiveness. Without Japan pan will continue to keep the policy ratesuch measures, the response by the Japan’s economy also seems to have near zero and use the tool of credit eas-ECB will have only “bought time,” and shifted to a lower gear, after recovering ing from time to time. Purchases of for-the underlying problems of high debt during the third quarter last year with eign assets should not be excluded asand low growth will remain. The ECB is an increase of 1.4% over the previous a tool to weaken the yen. Fiscal stimu-likely to lower the policy rate to 0.75% quarter. The slower growth in the rest of lus for the recovery programs amountsalthough the overnight interest rate will the world is affecting Japan negatively, to 3.8% of GDP in the first three sup-be lower, and it will continue to pur- but due to the need to build up the pro- plements to the original budget of fis-chase sovereign debt in the secondary duction levels after the earthquake, tsu- cal-year 2011. For fiscal-year 2012, themarkets through the SMP. Up to now, nami, and Fukushima nuclear disaster new budget is somewhat smaller thanliquidity operations (both credit and last spring, there are still expectations the previous one; however, the budgetquantitative easing) represent €788 bil- of 1.7% growth in 2012 – higher than in deficit is expected to be higher than 5%lion; thus, the ECB is more supportive 2011, when the economy is expected to of GDP, and debt equivalent of sometowards banks, governments, and bor- have shrunk by 0.5%. $3,500 billion will be issued to financerowers than at any time before. the budget. In the short run, govern-There are great risks to this outlook. As There are several reasons for our down- ment debt as a share of GDP will in-we have described above, the probabil- ward revision of the Japanese outlook. crease above 230%. In the longer run,ity of a worse outcome is almost as high Even if production in the private sec- the plan to raise the income tax over theas our more optimistic (but still down- tor is being restored, there have been next 25 years is one step in the process lags in the public recovery programs. In of improving the fiscal outlook. How- ever, Prime Minister Noda’s proposal toCommodity prices (indices) increase national sales taxes from 5%180 to 10% has not yet been accepted by160 parliamentarians in his own party.140 Commodity prices - total China120 Weaker exports have dampened the Food prices100 outlook for China, but to a lesser extent than for many other economies. The 80 Commodity rebalancing of growth to household prices - excl. 60 energy spending is still mostly rhetoric, but with higher wages, lower taxes, and infla- 40 tion, the outlook for private consump- 20 tion can improve. The government’s 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Ecowin January 24, 2012 9
  10. 10. Global Swedbank Economic Outlookprogram to build affordable housing outlook were to deteriorate sharply, a Brazilwill uphold investments. The economy slowdown of this appreciation could be A more restrictive economic policy andcan also – if needed – be supported by expected. slower global demand caused the Bra-a more expansionary fiscal and mon- zilian growth rate to dampen markedly Indiaetary policy than has been announced; during 2011. We estimate GDP to havethis will be made possible as the infla- After a strong 2010, GDP growth increased by 3% in annual terms, com-tion rate approaches comfort levels of slowed gradually during 2011, and we pared with the strong recovery after thesome 3-4%. We expect GDP to grow expect it reached on average 7.3%. crisis in 2010, when GDP increased byby 8.2% this year, revised downwards During this year, growth will fall further, 7.5%.from 8.4% in October because the glo- to 6.7%, before recovering somewhat to 7.0% in 2013. Going forward, the effects from higherbal trade and manufacturing outlook interest rates will be felt more through-has worsened. In 2013, the growth The main reason for the lower growth is out the economy. The Central Bankrate will slow further, to 7.8%, as the the attempts to reduce inflation, which increased the policy rate to 12.5% lastdomino effects from weaker real estate had reached double digits after the glo- summer and has since lowered it threeprices affect the economy. bal recession and financial crisis. The times to 11%. The credit expansion has Reserve Bank of India has over a peri-The main factor contributing to our been brisk but will start to slow. od of almost two years hiked the policyview, which is a bit more negative than rate by 475 basis points to 8.5%. After The global outlook will put a downwardthe consensus, is the property market, the summer of 2010, the inflation rates pressure on commodity prices, whichwhich is affecting the economy in many came down and have since stagnated will also affect Brazilian exports andways. Real estate investments make up at this lower level. Counteracting higher dampen investment growth in industrymore than 7% of GDP, and other parts interest rates and less liquidity, the in- and energy. Inflation will thus also beof the economy (10-15 %) are heavily flation rate has been driven by higher able to fall further, to just above 5%.reliant on property investments. About commodity prices, inflows of capital, a In order to maintain growth, fiscal andhalf of local governments’ revenues high growth of demand – not least in monetary policy will be made morecome from land sales. The rate of hous- the urban areas – and a weaker rupee. expansionary; this will also make theing starts, as well as of house prices, slowdown milder of growth in employ-has come down dramatically in some of We expect the inflation pressures to ment, income, and credit.the major cities over the last couple of abate in the coming quarters, and thatquarters, and land prices have started the Reserve Bank of India can start Countries with special impact onto fall. Mainly, this outlook sees a mild easing monetary policy this spring. Sweden and the Baltic countriesslowdown of the real estate market; if There are several risks affecting the In- Despite strong growth in quarterlyit were to accelerate and deepen, the dian economy, of which the global out- terms (0.5%) in the third quarter, theeffects on the economy would also be look is one. Another is the current ac- United Kingdom’s (UK) underlyingmore negative. The People’s Bank of count (export growth is slowing faster demand outlook is weak. We foreseeChina has cut reserve requirements, than import growth) and the budget twin GDP to grow, but only by 0.5% in bothand in the first half of 2012 it will also deficits which put a cap on the fiscal 2012 and 2013. To reduce the vastcut the policy rate, as inflation has fall- stimulus available if needed and also budget deficit of almost 9% of GDP inen further. The appreciation of the ren- affect confidence negatively, leading to 2011, the austerity package – which isminbi against the dollar will continue at lower consumption and investments. front-loaded and large – will dampensome 4-5 % per year, but if the export growth going forward.Consumer price outlook, 2010 - 2013 (annual percentage change) Despite the high inflation (reaching Outcome Forecast 5.2% in September before falling to 2010 2011 2012 2013 4.8% in November), the Bank of Eng-US 1.6 3.2 2.4 2.1 land has resisted calls to restrict mon-EMU countries 1.6 2.7 1.5 1.4 etary policy, expressing the view thatOf which: Germany 1.1 2.4 1.7 1.4 inflation pressures, caused by higher France 1.5 2.1 1.7 1.5 taxes, the weaker pound sterling, and Italy 1.5 2.8 2.1 1.0 higher commodity prices, are mainly Spain 1.8 3.1 1.8 1.6 temporary. The policy rate will remainUK 3.3 4.4 2.5 2.0 close to zero, and the unconventionalJapan -0.7 -0.2 -0.4 -0.2 monetary policy will be continued. TheChina 3.2 5.5 3.5 3.0 use of quantitative easing, as a shareIndia 10.2 8.4 5.3 4.5 of GDP, lately has been more substan-Brazil 5.9 6.6 5.2 5.0 tial than in most other central banks.Russia 6.9 8.6 7.0 7.5 Even so, the credit market is faced withSources: National statistics and Swedbank. austerity as British banks have become January 24, 2012 10
  11. 11. Global Swedbank Economic Outlookmore cautious in their lending due to terest rates and higher real disposable Take a look at the long viewtheir exposure towards euro zone fi- income stimulate private consumption. The long-term developments are, ofnancial markets. Fiscal and credit aus- New oil discoveries and real estate course, dependent on the outcome interity will dampen consumption and in- construction will lift investments. Un- the next couple of years. If the situ-vestment, holding back imports during employment will stabilise as the grow- ation in the euro zone improves, thethe forecast period. ing labour demand will be met by net need for acute crisis management is re- immigration. GDP is expected to grow duced, and there will be more room forGrowth in Russia will slow, but only by 2.0% in 2012 and 2.3% in 2013. growth-oriented policies. Reforms aremildly, as GDP growth falls from 4.2%in 2011 to 3.9% in 2012 and 3.7% in The collapse of the Danish hous- important – not just austerity! The need2013. Russian companies will increase ing market, which started in 2007 and is vast, especially in southern Europeinvestments more cautiously, as the where the situation deteriorated in where efforts must focus on strength-global outlook worsens and commod- 2008, is still affecting the economy ad- ening competitiveness by improving theity prices fall. Membership in the WTO versely as domestic demand is being functioning of labour and product mar-could mean stronger competition for held back by households’ adjustments kets, and increasing efforts on educa-Russian producers. A larger fall in the of their balance sheets. In the third tion and research and development. Aoil price than we have assumed here quarter, GDP fell by 0.8% in quarterly higher growth and export performancewould dampen the outlook and the terms. With its main trading partners in would alleviate budget and current ac-budget situation further. Another risk the euro zone, the crisis there will hit count constraints. It is important to noteis the credit crunch in the euro zone, Denmark. Because of the worsening that the situation in Germany does notwhich also affects Russia through de- global outlook and the Danish govern- have to worsen in order for the situationcreased capital inflows, and larger ment’s need to consolidate the budget, in Greece or Portugal to improve – this,outflows (in central and eastern Eu- the risk for a deeper recession has in- in the context of the euro zone, is not arope, also, there are large risks of a creased. We still see positive growth of zero-sum game.credit crunch as capital will be direct- 0.7% in 2012, followed by somewhat As mentioned above, the building ofed to banks in the euro zone, e.g., in stronger growth in 2013 as exports and stronger institutions in the euro zoneAustria, Italy, France, and Germany). investments improve slowly. must continue and will take time. In or-Russian households will feel the effects der for a eurobond market to function The recovery in Finland is losing mo-from the increased fiscal austerity after well, political and fiscal coordination will mentum, and GDP is now estimatedthe election, and this will hold back have to strengthen. Meanwhile, there to have increased by 2.8% last year. Asa more substantial increase in private could be setups where some countries the export outlook will worsen when theconsumption. On the other hand, lower take the lead. global economy slows, Finnish demandinflation during 2012 will ease the situa- is set to dampen. Consumer confidence The longer-term perspective also in-tion for households somewhat. is eroding and real income is falling, cludes the global imbalances and theThe Nordic countries show a mixed thereby slowing private consumption challenges to include the emergingeconomic picture in which Norway out- and real estate investments. Also, busi- markets in the global institutions, whichperforms the others. Even so, Norway ness investments are likely to be post- so far have been managed by the richerentered a soft patch during last year poned. GDP is expected to increase by countries. Multilateralism will be testedwhen GDP grew by only 1.4 % due to 0.4% this year, followed by a stronger further during 2012 and going forward,weakened confidence and subdued ex- performance of 1.5% in 2013, when net when it comes to trade negotiations, cli-ports. Domestic demand will provide exports and domestic demand begin to mate change, and financial regulation.the main growth impetus as lower in- recover slowly. As China and other stronger emerging markets enter more deeply into the glo- GDP growth in Norway, Finland, Denmark and the euro zone bal economy, the global monetary and 10 financial systems will also change, and 8 in the next decade or so the dollar will 6 face increasing competition from other euro zone 4 currencies, including the renminbi . TheAnnual growth in % 2 Finland euro will be part of the multipolar cur- 0 Norway* rency world;- how strong it will be will -2 Denmark be determined by the measures taken -4 now. A lot is at stake – the policymakers * total have a chance to make a difference, -6 -8 and it had better be positive! -10 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Ecowin Cecilia Hermansson January 24, 2012 11

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