Økonomisk Oversikt April 2008

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1 Økonomisk Oversikt April 2

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3 Contents Oversiktstabeller Makro nøkkeltall... Renter... 7 Valutakurser... 7 Redaktør Steinar Juel, Sjeføkonom Steinar.juel@nordea.com Tel Redaksjonen avsluttet: 1. april 2 Besøk oss på: Datakilder: Data er hentet fra Reuters EcoWin, nasjonale statistikkbyråer og egne beregninger dersom ikke annet er angitt. OVERBLIKK Inflasjonen er kommet, nå truer nedturen... NORGE Norsk økonomi merker nedturen ute, men mindre enn andre... Other Nordic economies DENMARK Easy times over for the economy...11 FINLAND Downturn set to last a few years...1 SWEDEN The economy is loosing momentum...17 Major economies USA Recession how deep and how long?...2 EURO AREA Economy on the brink of a downswing...2 JAPAN Export reliance makes vulnerable...2 CHINA Olympic gold in growth but slowdown just around the corner...2 Commodities OIL Still trending upwards, but the US is the wild card... METALS AND PULP Clouds gathering on the metal market horizon...1 April 2 Økonomisk Oversikt

4 Overblikk Inflasjonen er kommet, nå truer nedturen Situasjonen i amerikansk økonomi har forverret seg etter publiseringen av Økonomisk Oversikt 1-2 i januar. Trolig var det negativ vekst i BNP i 1. kvartal, og det ligger an til negativ vekst i inneværende. Da vil første halvår 2 defineres som en resesjonsperiode i USA. Boligbyggingen stuper, forbruksveksten er omlag null og sysselsettingen faller. Forverringen av situasjonen i verdens største økonomi svekker også veksten i andre land. I flere av disse er det i tillegg innenlandske forhold som trekker veksten ned. Boligmarkedet tynger i europeiske land som Storbritannia, Spania og Irland. Sterk prisstigning på matvarer og energi demper kjøpekraftsutviklingen i mange fremvoksende økonomier. Videre foretar myndighetene tilstramninger i den økonomiske politikken for å dempe inflasjonen. I forrige utgave av Økonomisk Oversikt anslo vi at inflasjonen ville ta seg opp, og vi bedømte sannsynligheten for resesjon i USA til å være nær %. Inflasjonen har steget og det er nå trolig resesjon i USA. Det vil ta tid før veksten i USA igjen kommer opp på et mer normalt nivå. Vi regner også med at inflasjonen vil være relativt høy enda en stund. Ingen opptur allerede i 29 Vekst i BNP E 2E 29E Verden 1) Norge, fastlands BNP Sverige USA Japan Euro-området Kina India Latin Amerika ) IMF-vekter, basert på økonomier som dekker 2,7% av verdens BNP. For de fleste land er vekstanslagene markert nedjustert, særlig 29-anslagene. I januar ventet vi en vekst i USA neste år på 2 ½ %, nå venter vi at den bare blir 1 ½ %. Anslått vekst i inneværende år er i tillegg nesten halvert. Ubalansene i USA er betydelig. Det er ingen tegn til at boligmarkedet er i ferd med å stabiliseres. Boligprisene har allerede falt med 1 %, og de vil trolig falle med ytterligere 1-1 %. Anslagene for banktapene øker måned for måned. Bankenes utlånskapasitet reduseres og kredittvurderingene strammes til. Swap- og kredittmarginene har steget kraftig. Effekten på kunderentene av de store kuttene i styringsrenten som sentralbanken Federal Reserve har foretatt er derfor foreløpig liten. Svikten i finansmarkedene gir en negativ bumerang tilbake til realøkonomien; boligkrisen forsterkes og andre investeringer dempes på grunn av vanskeligere tilgang på kreditt. Dette er ikke en normal konjunkturnedgang hvor bedriftene reduserer produksjonen fordi de har produsert for mye og lagrene er blitt for store. Det vil ta lang tid før banksektoren fungerer normalt igjen. Og det vil ta lang tid før husholdningenes finansielle stilling tillater at de igjen investerer mer i boliger og øker forbruket. Husholdningene må gjennom en konsolideringsprosess. Spareraten må opp fra null, og gjeldsveksten må ned. Norge opplevde for 1-2 år siden en bankkrise hvor overprisede eiendommer var en del av ingrediensene. Det samme var negativ sparing hos husholdningene. Det tok flere år før økonomien begynte å fungere normalt igjen. Sammenligner en de siste anslagene på tap i amerikanske banker med hva de norske hadde den gangen begynner de størrelsesmessig å ligne på hverandre når en ser dem i forhold til størrelsen på økonomiene. En kraftig svekkelse av USD er det eneste som for tiden virker positivt på veksten i amerikansk økonomi. Men det virker negativt på europeiske økonomier. Av de store valutaene er det særlig EUR, og det siste året JPY, som har steget kraftig mot dollaren. En rekke valutaer, herunder CNY og de fleste valutaene i Midtøsten er fortsatt i stor grad knyttet til dollaren. Når dollarens internasjonale verdi skal korrigeres blir derfor kursbevegelsen mot EUR ofte overdreven. Lager man en syntetisk EUR-kurs tilbake til da Bretton Woods fastkurssystem (mot dollar) brøt sammen ser en at EUR aldri har vært så sterk mot USD som nå. Rekordsterk EUR mot USD vil gi effekter 1. EUR/USD EUR/USD Source: EcoWin, Nordea Til tross for svakere vekst internasjonalt og sterk EUR har veksten i Euroland så langt holdt seg overraskende godt oppe. Det er særlig i Tyskland, pengeunionens største økonomi, at økonomien har fortsatt å utvikle seg positivt. Eksporten vokser fortsatt, ordrebøkene til industrien er fulle og arbeidsledigheten kryper ned. Forbruksveksten har imidlertid skuffet. I år venter vi at den vil ta seg opp fordi sysselsettingen har fortsatt å stige og lønnsveksten ventes å ta seg opp. Det er store forskjeller på den økonomiske situasjonen i de ulike land i Den økonomiske og monetære unionen (ØMU). Veksten i Spania har i flere år vært høy, men store ubalanser har samtidig bygd seg opp. Underskuddet på landets driftsbalanse overfor utlandet er 1 % av BNP, boligprisene er blitt drevet i været og boligbyggingen har vært særdeles høy. De siste par årene har boliginvesteringene i Spania vært oppunder 1 % av BNP, mens de i USA på det høyeste var % av April 2 Økonomisk Oversikt

5 Overblikk amerikansk økonomi. Spansk økonomi, som utgjør 12 % av eurolandenes, står foran en omfattende konsolidering, hvor boligprisene og boligbyggingen ventes å falle markert. Mange nordmenn med boliger eller feriehus i Spania vil kunne rammes av dette. En mer langvarig lavvekstperiode i USA og en sterkere EUR enn tidligere ventet gjør at vi har nedjustert våre vekstanslag for Euroland, spesielt for 29. Den vekstoppgangen vi i Økonomisk Oversikt 1-2 ventet neste år tror vi ikke lenger vil komme. Tvert imot venter vi at veksten i Norges viktigste eksportområde blir enda lavere i 29 enn i 2. Vi regner derfor med at Den europeiske sentralbanken (ECB) vil sette ned renten med 1 prosentpoeng i 29 slik at styringsrenten ender på, %. Fjorårets knallsterke vekst i norsk økonomi gjør at veksten i år trolig blir noe høyere enn tidligere anslått. For neste år har vi imidlertid nedjustert også den norske veksten. Norske eksportører er foreløpig begrenset grad rammet av svakere konjunkturer internasjonalt og en sterk NOK. I første omgang er det renteøkningene til Norges Bank som demper veksten her i landet. Boligprisene faller langsomt, igangsettingen av nye boliger faller og forbruksveksten avtar. Vi regner med at disse vekstdempende effektene av renteøkningene vil fortsette. Etter flere år med svært sterk gjeldsvekst og i fjor negativ sparing regner vi fremover med en gradvis konsolidering av husholdningenes finansielle stilling. Forbruksveksten ventes å halveres i år og avta ytterligere i 29. Boliginvesteringene anslås å falle både i år og neste år. Svakere vekst i husholdningenes etterspørsel vil gi lavere produksjonsvekst i en rekke næringer. Sysselsettingsveksten vil dermed avta. En ventet mer ekspansiv finanspolitikk neste år, med sterkere økning i offentlig forbruk, vil trolig ikke være nok til å hindre at arbeidsledigheten øker noe. Arbeidsmarkedet vil likevel fortsatt måtte karakteriseres som stramt. Lønnsveksten ventes å avta noe neste år, men vil trolig fortsatt ligge over %. Norges Bank har ved hjelp av lav rente bevisst presset kapasitetsutnyttelsen i norske økonomi til over 1 % for å øke kostnadspresset og få inflasjonen opp til 2, %. Underliggende inflasjon ligger nå i målområdet, noe som tilsier at kapasitetsutnyttelsen skal ned igjen. Det er den prosessen som nå har startet. Med en langsom nedkjøling av økonomien vil det ta tid før inflasjonspresset avtar. Underliggende inflasjon vil trolig komme over inflasjonsmålet i siste del av 29 før prisstigningen flater ut og senere kommer noe ned igjen. Norsk industri nyter fortsatt godt av høye priser på olje, gass, metaller, kunstgjødsel mv. Investeringene i Nordsjøen og i norsk industri fortsetter derfor å stige i inneværende år. Oljeinvesteringene kan øke også neste år mens investeringene i fastlandsnæringene trolig vil flate ut. Det gjelder både investeringer i industrien og i forretningsbygg. Vi venter også at tradisjonell eksport vil vokse langt mindre i år og neste år enn i fjor. Det skyldes både svakere markedsvekst og forverret konkurranseevne gjennom høy lønnsvekst og sterk NOK. Rentetoppen er nær.%.2%.%.7%.%.2%.% 1Apr7 21Nov7 27Jun 1Feb9 Sep9 1Apr1 Norges Banks styringsrente Nordea anslag Turbulensen i finansmarkedene internasjonalt har presset opp pengemarkedsrenter og kredittmarginer også her i landet. Resultatet er at privatpersoner og bedrifter i det siste har opplevd renteøkninger uten at Norges Bank har gjort noe med sin styringsrente. Vi tror situasjonen med høye marginer vil vare enda en stund og gjøre at Norges Bank ikke kommer til å heve styringsrenten over, %. Skulle situasjonen i penge- og kapitalmarkedene bedres radikalt de nærmeste måneder, kan imidlertid enda en renteøkning bli aktuelt. Svakere internasjonale konjunkturer neste år og rentekutt i Euroland tilsier at Norges Bank vil sette renten noe ned i 29. Vi venter en rentereduksjon på ½ prosentpoeng. Vedvarende høyere renter i Norge enn hos våre handelspartnere og fortsatt høy oljepris tilsier at NOK vil være sterk de neste par årene. Norsk økonomi ville vært sterkere rammet av vekstnedgangen internasjonalt dersom oljeprisen og prisene på andre viktige eksportvarer hadde snudd ned. Det er det så langt ingen tegn til. Snarere tvert i mot. Oljeprisen setter i skrivende stund stadig nye rekorder. Det er begrensninger på tilbudssiden og det er høy etterspørsel etter energi og råvarer i de fremvoksende økonomier. I utgangspunktet venter vi at oljeprisen kan komme noe ned senere i år, men at trenden videre fremover vil være opp. Skulle vekstsvekkelsen i USA og finansuroen gi et større tilbakeslag også i land som Kina vil vi kunne få en større nedgang i oljeprisen. Innenfor en horisont på 1-2 år vurderer vi risikoen for det til å være liten. Steinar Juel, sjeføkonom steinar.juel@nordea.com April 2 Økonomisk Oversikt

6 Overblikk BNP reel vekst, % Inflasjon, % E 2E 29E E 2E 29E Verden 1) Verden 1) BIG- 2) BIG- 2) USA USA Japan Japan Euroområdet Euroområdet Tyskland Tyskland Frankrike Frankrike Italia Italia Spania Spania Nederland Nederland Belgia Belgia Østerike Østerike Portugal Portugal Hellas Hellas Finland Finland Irland Irland Danmark Danmark Sverige Sverige Norge Norge Island Island UK UK Sveits Sveits Russland Russland Polen Polen Tjekkia Tjekkia Ungarn Ungarn Estland Estland Latvia Latvia Litauen Litauen Tyrkia Tyrkia Kina Kina India India Asia- ) Asia- ) Latin-Amerika- ) Latin-Amerika- ) ) Veiet gjennemsnitt av landene i denne tabellen. Dekker 2,7% av verdens BNP. Vektene er beregnet ut fra kjøpekraftskorrigerte BNP-nivåer for 2 i henhold til IMF's World Economic Outlook database 2) USA, Japan og euroområdet ) Indonesia, Malaysia, Filippinene, Sør-Korea og Thailand ) Argentina, Brasil og Mexico Offentlig budsjettbalanse, % av BNP Driftsbalanse, % av BNP E 2E 29E E 2E 29E BIG BIG USA USA Japan Japan Euroområdet Euroområdet Tyskland Tyskland Frankrike Frankrike Italia Italia Finland Finland Danmark Danmark Sverige Sverige Norge Norge Island Island UK UK Sveits Sveits Russland Russland Polen Polen Tjekkia Tjekkia Ungarn Ungarn Estland Estland Latvia Latvia Litauen Litauen Tyrkia Tyrkia Kina Kina India India Asia Asia Latin-Amerika Latin-Amerika April 2 Økonomisk Oversikt

7 Overblikk Pengepolitiske styringsrenter Differanse styringsrenter mot Euro-området 1.. M M 12M 2M 1.. M M 12M 2M USA USA Japan Japan Euro-området..... Euro-området Danmark Danmark Sverige Sverige Norge Norge Storbritannia Storbritannia Sveits Sveits Polen Polen Tsjekkia Tsjekkia Ungarn Ungarn ) Differanse mot USA mnd. renter Differanse mnd. renter mot Euro-området 1.. M M 12M 2M 1.. M M 12M 2M USA USA Japan Japan Euro-området Euro-området Danmark Danmark Sverige Sverige Norge Norge Storbritannia Storbritannia Sveits Sveits Polen..... Polen Tsjekkia Tsjekkia Ungarn Ungarn Estland Estland Latvia Latvia Litauen Litauen ) Differanse mot USA 1-års benchmark statsobligasjonsrenter Differanse 1-års renter mot Euro-området 1.. M M 12M 2M 1.. M M 12M 2M USA USA Japan Japan Euro-området Euro-området Danmark Danmark Sverige Sverige Norge Norge Storbritannia Storbritannia Sveits Sveits Polen Polen Tsjekkia Tsjekkia Ungarn Ungarn ) Differanse mot USA Valutakurser mot NOK Valutakurser mot EUR og USD 1.. M M 12M 2M 1.. M M 12M 2M EUR/NOK EUR/USD USD/NOK EUR/JPY JPY/NOK EUR/GBP DKK/NOK EUR/CHF SEK/NOK EUR/SEK GBP/NOK EUR/NOK CHF/NOK EUR/PLN PLN/NOK CZK/NOK USD/JPY HUF/NOK USD/GBP RUB/NOK USD/CHF EEK/NOK USD/SEK LVL/NOK USD/NOK LTL/NOK USD/PLN CNY/NOK USD/CNY ) Pr. 1 enheter 7 April 2 Økonomisk Oversikt

8 Norge Norsk økonomi merker nedturen ute, men mindre enn andre Lønns- og prisveksten blir høy Men kapasitetsutnyttingen vil avta Finansmarkedene strammer til for Norges Bank Norges Bank nær rentetoppen Uro internasjonalt skaper usikkerhet Norsk økonomi har i hovedsak utviklet seg som anslått i forrige utgave av Økonomisk Oversikt, publisert i januar. På den ene siden er det tegn til avtagende vekst i husholdingenes etterspørsel. På den annen side blir det stadig tydeligere at den høye kapasitetsutnyttelsen i økonomien slår ut i høyere pris- og kostnadsvekst. Bildet av internasjonal økonomi, og særlig av den amerikanske, er derimot vesentlig svekket. Samtidig har uroen i lånemarkedet snarere tiltatt enn avtatt. Hvor sterk norsk økonomi vil rammes av svakere utvikling internasjonalt er i stor grad avhengig av hvordan oljeprisen og prisen på andre viktige eksportprodukter utvikler seg. Vi venter at fortsatt god vekst i Asia vil gjøre at etterspørselen etter olje og etter mange av våre øvrige eksportprodukter vil holdes godt oppe. I så fall kan Norge bli et av de landene i Vesten som blir minst rammet av nedgangen i USA. Hvordan finansmarkedene utvikler seg blir også helt avgjørende. Uroen i kredittmarkedene gjør at lånekostnadene øker mer enn Norges Banks renteøkninger. Hvor mye og hvor lenge finansuroen vil dra opp lånekostnadene er høyst usikkert. Skulle markedsrentene og kredittmarginene bli liggende på ekstraordinært høye nivåer venter vi at Norges Bank vil holde styringsrenten lavere enn tilfellet ville vært ellers. Like viktig kan utviklingen i rentedifferansen mot utlandet og valutakursen bli. Dersom nedturen i verdensøkonomien blir sterk kan det føre til betydelige rentekutt hos våre nærmeste handelspartnere. Det kan gi markert sterkere NOK og gjøre at Norges Bank vil sette renten lavere enn det våre anslag angir. Vi venter i utgangspunktet ikke noen sterk rentenedgang hos våre viktigste europeiske handelspartnere med det første. Norges Bank kan da holde renten relativt høy inntil vi får klare signaler om at pris- og lønnsveksten er på vei ned. Blandet bilde av etterspørselen Oljeselskapenes planer for oljeinvesteringer i 2 ligger godt over anslaget for 27 gitt på samme tidspunkt i fjor. Noe av økningen representerer nok rene kostnadsøkninger. Men det blir trolig også reelt sett god vekst i oljeinvesteringene i 2. Vedvarende høye oljepriser tilsier at investeringsnivået blir høyt også i 29. Utsiktene for den oljerelaterte industrien i fastlands-norge er derfor fortsatt god. For eksportorientert industri er bildet noe mer blandet. Eksportprisene har økt kraftig siden 2 og vil sannsynligvis holde seg godt oppe, i all fall i år. Sammen med betydelige kapasitetsutvidelser tilsier det god produksjonsvekst for denne delen av industrien også i år. Neste år regner vi med at svak utvikling internasjonalt i større grad vil dempe veksten i norsk tradisjonell eksport. Bedriftenes investeringer i fastlandsøkonomien har økt mye de siste årene. Både SSBs undersøkelse av investeringsplanene til industrien og igangsettingen av bygg i industrien tyder på kraftig vekst i industriinvesteringene i år. For resten av næringslivet i fastlands-norge regner vi med at investeringsveksten Norge: Makroøkonomiske størrelser (% årlig vekst hvis ikke annet oppgitt) 2 (NOK mrd) E 2E 29E Konsum i husholdninger og ideelle org Konsum i offentlig forvaltning Bruttoinvesteringer i fast kap. i alt Bruttoinvesteringer, Fastlands-Norge Bruttoinvesteringer, olje Lagerinvesteringer* Eksport olje og gass andre varer Import BNP 1, BNP, Fastlands-Norge 1, Arbeidsledighet (AKU), % Konsumpriser, % årsvekst Underliggende inflasjon, % årsvekst Årslønn inkl. pensjonskostnader, % årsvekst Driftsbalanse (mrd. NOK) i % av BNP Handelsbalanse i % av BNP Overskudd offentlige budsjetter i % av BNP * Bidrag til bnp vekst (% poeng) April 2 Økonomisk Oversikt

9 Norge flater ut i løpet av inneværende år. Igangsettingen av boliger har falt de siste måneder. Nedgang boligprisene i annenhåndsmarkedet, høye byggekostnader og langt tregere salg av nye bolig tilsier at igangsettingen vil falle ytterligere før den stabiliseres. Også igangsettingen av fritidshus, garasjer og lignende har falt i det siste. Her kan nedturen bli betydelig kraftigere enn for boliger. I sum venter vi avtagende, men fortsatt god vekst i investeringene i fastlands-norge i år. I 29 blir investeringsveksten svakere. Sammen med lavere eksportvekst vil det bidra til en gradvis avmatning i etterspørselen. Men om veksten i norsk økonomi dempes så mye at mangelen på arbeidskraft avtar tilstrekkelig til at lønnspresset avtar avhenger av hvor sterkt veksten i privat forbruk dempes. Etter svært høy forbruksvekst i 27 tyder de siste detaljomsetningstallene på at den er i ferd med avta. Husholdningenes negative sparerate, lavere vekst i deres disponible realinntekt, høyere rente og etter hvert lavere vekst i sysselsettingen tilsier markert lavere forbruksvekst fremover. Et kraftig tilbakeslag i forbruket venter vi imidlertid ikke Våre anslag tilsier en gradvis avtagende vekst i etterspørselen i privat sektor. I offentlig sektor kan bildet bli det motsatte. I år vil lønnsveksten spise opp mye av veksten i kommunenes inntekter, men vi regner med at de blir kompensert i 29 og at finanspolitikken vil ha en viss ekspansiv innretning. Det vil særlig være aktuelt når det er tegn til avmatning i privat etterspørsel. Tiltakende vekst i 27 7 % BNP fastland å/å Sysselsetting å/å Store gevinster på utenrikshandelen 1 Indeks 2:1 = Eksportpriser i alt Importpriser % Indeks 2:1 =1 Eksportpriser eksl. olje, skip og plattformer Oljeinvesteringene drar opp veksten i industrien 1 Indeks 2:1 =1 Indeks 2:1 = Etter hvert mindre mangel på arbeidskraft I sum regner vi med gradvis avtagende produksjonsvekst. Det innebærer at også veksten i sysselsettingen vil avta. Trolig vil også arbeidstilbudet vokse langsommere. Arbeidsledigheten ventes derfor å holde seg lav, men øke litt i Oljeinvesteringer De første lønnsoppgjørene tyder på at lønnsveksten i år blir nær %. Et noe mindre stramt arbeidsmarked i 29 og svakere inntjeningen i mange bedrifter, blant annet som følge av høy lønnsvekt i år og i fjor, tilsier mer moderat lønnsvekst neste år. Underliggende inflasjon ventes å stige gjennom 2 og inn i 29. Det tar tid før kostnadsøkninger slår ut konsumprisene. Rentetopp, men strammer pengepolitikk I løpet av året ventes underliggende inflasjon å komme opp på inflasjonsmålet. Når lønnsveksten samtidig er høyere enn det som over tid er forenlig med inflasjonsmålet på 2, % er det gode argumenter for ytterligere pengepolitiske tilstramminger. 9 Industri produksjon Men utlånsrentene har kommet bra opp % % mnd pengemarkedsrente Gjennomsnittlig utlånsrente forbrukere, bedrifter og kommuner Styringsrente Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 7 9 April 2 Økonomisk Oversikt

10 Norge Til tross for at inflasjonen synes å bli om lag som anslått i forrige utgave av Økonomisk Oversikt har vi nedjustert anslaget på Norges Banks styringsrente. Vi venter nå at styringsrenten topper ut på, % mens vi i forrige Økonomiske Oversikt ventet at renten ville heves videre til,7 %. Nedjusteringen skyldes dels svakere vekstutvikling internasjonalt og dels at de kunderettede rentene har gått mer opp enn styringsrenten pga uroen i de internasjonale finansmarkedene. Vi tror det vil ta tid før uroen er over. Vi regner med høyere forskjell mellom styringsrenten og pengemarkedsrenten enn det som var vanlig i årene 2-2 en god stund framover. En ytterligere styrking av NOK vil også bidra til at pengepolitikken i sum blir strammere. En sterk krone bidrar til at inflasjonsimpulsene fra utlandet blir lavere, og den virker dempende på eksporten fordi konkurranseevnen til norsk næringsliv svekkes. Forbruksveksten viser tegn til å flate ut 12. Index Detaljhandel mnd glidende gjennomsnitt Solid utenriksbalanse og skyhøy oljepris NOK % 22. Driftsbalanse % av BNP,hs Pengepolitikken ligger altså an til å bli strammere særlig i 2 enn det Norges Banks rentesetting alene tilsier. En rente på, % vil da trolig være tilstrekkelig til å dempe veksten i innenlandsk etterspørsel slik at presset i arbeidsmarkedet avtar. I Norges Banks terminologi; til at produksjonsgapet, deres mål på kapasitetsutnyttelsen, avtar. Med etter hvert avtagende produksjonsgap, avtagende lønnsvekst og rentekutt i euroland kan vi få en forsiktig rentenedgang i Norge i løpet av 29 eller Oljepris i NOK NOK holdes tilbake av finansuroen Markedet priser inn betydelig høyere rentedifferanse mot våre handelspartnere enn i fjor høst. Samtidig har oljeprisen økt til rekordnivåer. Sannsynligvis er det finanskrisen som gjør at NOK likevel ikke er sterkere. Redusert risikoappetitt blant internasjonale investorer gjør antagelig at færre tar sjansen på å investere i perifere valutaer som NOK. Vi tror ikke uroen i markedene er over med det første og sannsynligvis kan NOK svinge mye framover. På noe sikt tror vi høyere rente i Norge enn hos våre handelspartnere og en høy oljepris vil bidra til at NOK styrker seg noe mer. Skulle NOK jevnt over bli svakere enn vi venter kan Norges Bank gi signaler om ytterligere renteøkninger, noe som begrenser potensialet for en svekkelse. Lange renter ut igjen Norsk 1 års statsrente har siden i høst falt i forhold til tilsvarende EUR-renter. Det kan være at finansuroen har bidratt til økt etterspørsel etter norske statsobligasjoner. På sikt, med relativt høye korte renter i Norge tror vi de lange rentene her i landet skal stige mer enn EURrentene. Men risikoappetitten må nok vende noe tilbake for at vi skal få en slik utgang i rentedifferansen. Og forventninger til høye renter i Norge % % p Differanse mellom norsk og 7. og tysk 2 års swap rente, hs Sep Nov Jan Mar May Jul Sep Nov Jan 7 EURNOK reversert Men NOK fortsatt noe på den svake siden Mar Index Index Importveid NOK Q Erik Bruce erik.bruce@nordea.com May NOK i Mars pengepolitiske rapport Jul Aug Sep Oct Nov Dec Jan 7 Q2 Feb Mar Apr May Jun 7 1 April 2 Økonomisk Oversikt

11 Denmark Easy times over for the economy Growth set to drop sharply in the period ahead. Housing market main cause of slowdown......but estimates lowered due to the credit crisis. Threat of overheating is easing. It seems to be increasingly clear that the Danish economy will face some years with much more moderate growth than the past few years. the main reason is still the downturn in the housing market that has adversely affected private consumption growth and residential investment. The Danish economy is also affected by the fallout from the financial crisis in international markets, although it has not initially led to substantial losses in the Danish financial sector. The high money market rates have made financial institutions announce rate hikes on certain loan products. The higher lending rates will in all probability strengthen the trend towards lower growth in investment and private consumption. More important factors, however, are the outlook for softer global growth and the weak USD, which point to weak export trends in the coming years. These factors are the main reason why we have downgraded our growth forecast. Over time the lower growth will cause unemployment to rise from the current record-low level, and this will ease the upward pressure on wage growth. The low-growth period will thus help to reduce the current high inflation pressures in the Danish economy and ensure that exporters competitiveness is not seriously harmed. On the one hand, the need for an actual fiscal policy tightening is eliminated. On the other hand, it is of vital importance for the long-term stability of the Danish economy that growth is allowed to flatten by its own accord in the years ahead. Housing market decisive for economic cycle The recent years downturn in the housing market plays a vital role for our forecast of lower growth in the years ahead. Historical experience suggests that the number of housing transactions is decisive for whether the economy moves above or below the capacity limit. By this reckoning, the decline in the number of home sales since early 2 should thus eliminate capacity pressures in the Danish economy over the course of a few years. We therefore look for economic growth below the long-term average during the next couple of years with a resultant slight increase in unemployment. The housing market does not seem poised for a recovery anytime soon. According to the latest data from the Association of Danish Mortgage Banks the number of homes on the market is still record high with a very weak trend in sales. In our view, the weak housing trend is closely linked with the strong price increases up to 2 that pushed the housing burden to a very high level. This burden probably needs to ease by just over % points for the market situation to become more normal. However, this does not mean that we are facing a period with sharp price declines nationwide. The housing burden is more likely to ease over a lengthy period with zero growth in prices, while gradually increasing disposable incomes slowly reduce housing costs relative to income. The expected decline in interest rates will also help stabilise the market situation, although the interest rate decline is unlikely to be large enough to trigger new house price increases. Denmark: Macroeconomic indicators (% annual real changes unless otherwise noted) 2 (DKKbn) E 29E Private consumption Government consumption Fixed investment government investment residential investment business fixed investment Stockbuilding* Exports Imports GDP Nominal GDP (DKKbn) 1.2 1,.2 1,1. 1,9. 1,77.1 1,. Unemployment rate, % Unemployment level, ' persons Consumer prices, % y/y Hourly earnings, % y/y House prices, one-family, % y/y Current account (DKKbn) % of GDP General govt. budget balance (DKKbn) % of GDP Gross public debt, % of GDP * Bidrag til BNP vækst (% points) 11 April 2 Økonomisk Oversikt

12 Denmark So far the housing market downturn has masked large regional differences, which are most clearly reflected in house price data. Prices of owner-occupied flats in Copenhagen and Århus have fallen the most, with singlefamily houses in the Greater Copenhagen area coming in second. In the rest of the country house prices continued to rise throughout 27, but the number of homes on the market is also on an uptrend. We also see tentative signs that the market for owner-occupied flats in Copenhagen is past the initial correction, as the number of homes for sale is starting to fall from a very high level; this suggests a more homogeneous house price trend in the various regions going forward. Price increases weigh on private consumption The record-low unemployment rates, prospect of healthy pay rises and tax cuts should actually provide the basis for quite healthy private consumption growth in the coming years. Still, consumers seem to have become more pessimistic about the economic outlook, which has sent consumer confidence to the lowest level since the spring of 2 when the most recent downcycle in the Danish economy bottomed. Another reason for the low consumer confidence is probably that disposable income growth has to some extent been eroded by the steep increases in prices of energy and food, which have pushed inflation above %. This makes the impact of higher interest rates and the housing market slowdown somewhat stronger than we anticipated earlier. However, households sensitivity to the banks interest rate hikes should not be exaggerated. Firstly, the rate hikes do not apply to most home loans. Secondly, households outstanding debt mostly consists of mortgage loans and adjustable mortgage rates have actually fallen slightly. Although we expect private consumption growth to be comparatively weak this year, the annual growth rate will be quite high, but it mainly reflects the strong spending growth in H2 27. Hence, the decline in private consumption growth will not affect our forecasts until 29 when disposable income growth will slow down slightly as employment declines. Crisis will mainly hit investment and exports The softening of the housing market is the main reason why we expect quite a sizeable drop in residential investment this year and in 29. Turning to business investment, we still expect a high investment level, but growth will probably be somewhat lower. One of the reasons is that growth in a string of Denmark s key export markets is likely to drop sharply, and domestic demand will also slow gradually. We have also lowered our business investment forecast for 2 due to the protracted credit crisis. Investments by non-financial companies strongly surpassed last year s savings, making continued investment growth quite reliant on further borrowings. And non-financials have a larger portion of their debt with banks and are thus more vulnerable to higher lending rates in the wake of the credit crisis. Consumption and investment boom coming to an end. % Investments Privat forbrug Contribution to GDP-growth Stocks Net exports Government consumption GDP Source: Statistics Denmark, Danish central bank, Ecowin and own calculations. Weak housing market curbs capacity pressure Home sales ' Homes sales, lead 2 years 2 Output gap, rhs % Source: OECD, Association of DK Mortgage Banks, Statistics Denmark and own calculations. Housing burden must fall for market to normalise 2. % of disposable income Housing burden % sales Sales of one-family houses, rhs Housing burden calculated based on fixed-rate loans including property tax and mortgage interest relief. Source: Statistics Denmark, Ecowin and own calculations. Households mainly have mortgage loans 2 BnDKK Lending to households etc Housing loans, banks Other loans, banks 7 BnDKK Mortgage loans fixed rate Mortgage loans, variable rates Source: Statistics Denmark, Danish central bank, Ecowin and own calculations April 2 Økonomisk Oversikt

13 Denmark Exports are also expected to be hit by the US slowdown and the weaker growth in the Euro area, Sweden and the UK. The setback in Denmark s main export markets coincides with an erosion of competitiveness due to the depreciation of the USD and the GBP. We see a risk that Danish exporters are facing a tough time in a situation of harsher price competition in response to weaker demand growth. Weak export trends are thus the reason why we expect the current account deficit to shrink further during the rest of the forecast horizon. Inflation pressure at multi-year high In the early months of the year inflation surprised strongly on the upside on the back of persistently higher prices of oil and food. Concurrently with the rising commodity prices, the strong capacity pressure in the Danish economy has accelerated producer price growth; the price growth of goods made in Denmark has not been higher since the spring of 192. Households have also noticed the higher consumer prices, as their inflation expectations have risen sharply over the past eight months. Combined with the record-low unemployment, this suggests quite high wage growth this year, which will further add to domestic inflation pressures. The rising commodity prices could also contribute further to inflation; overall, we thus expect average inflation in 2 to move as high as % although the contribution from energy prices will decline during the year. Next year inflation should be somewhat lower thanks to the stabilisation of oil prices measured in DKK and the halt in the strong price increases of food. Moreover, towards the end of 29 we also expect the slight rise in unemployment to gradually ease some of the upward pressure on wage growth. Central bank keeps interest rate gap vs ECB Despite the turbulence in the financial markets since last summer the DKK has not been under fundamental pressure and the Danish central bank has maintained its interest rate differential of 2 bp versus the ECB. We expect this to remain the case also going forward. At the long end of the yield curve the turmoil in financial markets has widened the yield spread between Danish government bonds and German equivalents due to the higher liquidity in the German government bond market. This spread will likely narrow again once the markets calm down a bit. Later in the forecast period a referendum may be held about Denmark s membership of the Euro area. The outcome of the 2 referendum showed that a No vote will not affect the support for the fixed exchange rate policy, and we therefore do not expect any appreciable yield spread swings versus the Euro area ahead of a possible referendum. Business investment relies on borrowings 12 BnDKK Current account balance Savings balances BnDKK Financial companies Public sector Non-financial companies Households Source: Statistics Denmark. Strong DKK implies weak export trends 17. % y/y % y/y Exports, constant prices Trade weighted DKK, reversed rhs Source: Statistics Denmark and Danish central bank. Higher inflation expectations push up wage growth 7. % y/y Expected consumer prices Net. in the next 12M, advanced M, sa, rhs, Wages in manufacturing 1. Note: Inflation expectations corrected for change in survey practice in January Source: Statistics Denmark and own calculations. Highest price rise of Danish goods for many years 2 % y/y % y/y Goods produced in DK Anders Matzen anders.matzen@nordea.com Imported goods April 2 Økonomisk Oversikt

14 Finland Downturn set to last a few years Slowdown more prolonged than earlier foreseen. Risks may lurk also in Finland. Inflation is a worry now, but it will ease next year. Tax cuts awaited in 29. Growth slows for longer than expected Finnish economic growth slowed markedly as early as in the latter half of 27. The growth rate was some.%, while in H1 it was just over %. Our earlier estimates assumed that the downturn in the world economy would temporarily slow down economic growth in Finland, which would mainly ease the bottlenecks caused by robust growth. However, the downswing in the export markets appears to be longer than estimated earlier. This will inevitably be reflected in the outlook for the Finnish economy. We expect economic growth to be around 2% on average in 2 and 29. So, the downturn still looks set to be relatively mild, as also indicated in our earlier estimate. But the development is so weak that employment growth looks in danger of stagnating, while unemployment may not continue to fall. The overall picture of the Finnish economy is very balanced in many respects, but the risk associated with a prolonged slowdown of the world economy cannot be shrugged off. The risks are partly domestic. Households savings ratio is record low. A drop in confidence caused by weakening labour market conditions may thus have a surprisingly strong negative effect on consumption. Export growth close to stagnating Finland s exports to Emerging Markets exceed the average of the Euro-area countries. Russia accounts for 1%, for instance. Unfortunately, this does not guarantee Finland a better-than-average export outlook. In 27 Finnish exports already grew more slowly than in the Euro area, and Finland s exports typically fluctuate quite heavily because of its sector structure. A longerthan- expected slowdown in export markets combined with the strong EUR is indeed bad news for the Finnish economy. According to our estimates, export growth will nearly halt during 2 and improvement is not likely until 29. Another worry for the export industry is Russia s timber duties. Russia has raised the duty on timber exports to EUR 1 per cubic metre and plans another hike to EUR by early 29. This exceeds the price of pulpwood used as raw material for pulp; in practice the duty threatens to end imports of timber from Russia. The percentage of imports has been quite high, so not only will the duty increase demand for timber in Finland, but also lead to further arrangements that will reduce the capacity of the wood processing industry. Consumption growth on shaky ground? Exports account for nearly half of Finland s GDP, so cyclic fluctuations related to exports always play a key role. Nonetheless, Finland s economy has recently grown more robustly than the export markets or Sweden, for instance, where trends are usually very similar to Finland. One explanation could be the brisk consumption growth, which has run close to % over the past few years. Employment, wages and capital income have all improved, supporting consumption demand. In this respect the outlook for 2 is also good, although rising Finland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2 (EURbn) E 29E Private consumption Government consumption Fixed investment Stockbuilding* Exports Imports GDP Nominal GDP (EURbn) Unemployment rate, % Industrial production, % y/y Consumer prices, % y/y Hourly wages, % y/y Current account (EURbn) % of GDP Trade balance (EURbn) % of GDP General govt budget balance (EURbn) % of GDP Gross public debt (EURbn) % of GDP * Contribution to GDP growth (% points) 1 April 2 Økonomisk Oversikt

15 Finland prices will erode purchasing power. In 29 employment growth will slacken, but the rise in real wages will remain good, so the income development appears moderate. However, this does not mean that there are no worries in sight. The rise in disposable income does not correspond to the amount of cash that households have spent hence households savings ratio has dropped to a record-low level. This is a typical trend when consumers are confident about their own finances. Conversely, in a downturn there is a risk of a rising savings ratio. The risk is especially significant if labour market conditions start to falter. Hence, it would be wrong to say that the only risks lie abroad. It is possible that households saving balance is in need of correction, which may intensify the downward trend of the economy. Inflation still bigger worry than unemployment Employment has improved sharply in recent years, surpassing even the most optimistic expectations. Vacant positions have been at historical highs and the biggest concerns have been employment mismatches and bottlenecks. Against this backdrop, unemployment growth has seemed a distant threat. However, in our view economic growth will slow to such an extent that unemployment will start to increase. Ultimately, this is greatly dependent on how the labour supply reacts to slowing growth. At the beginning of this decade, labour supply fell more than before, which combined with a growing number of people retiring may keep unemployment under control this time too. Structural changes in the economy could still accelerate, which may notably increase regional differences. Consumers are currently more concerned about the rising prices of food and fuels than the threat of unemployment. In Finland, major changes in food prices usually occur about three times a year. Therefore food prices did not jump until the turn of the year, but the increase was steep. The year-end increases will not be the only ones; more increases are in store during the course of the year. Oil prices are also higher than we estimated earlier. In addition, the uncertainty in the financial markets has prevented declines in credit interest rates, which are included in the domestic consumer price index. Overall, inflation risks have been largely realised this year. Still, it holds true that the highest inflation spike is likely to occur in the first half of the year and inflation will slow after that. The estimate is based on the view that prices of oil and other commodities will no longer rise from the peak levels seen during the spring of 2, but ease somewhat at least temporarily. GDP growth to slow further 9 % y/y % y/y GDP, national accounts -1 Monthly GDP indicator, -2 M mov. avg Export growth to decelerate sharply 2. % y/y Private consumption Exports Note: Q mov. avg Household savings rate record low % y/y 19 Index 1 Household saving % 17 ratio, rhs Consumer 7 confidence Unemployment still falling 11. % Unemployment rate % Finland Euro zone April 2 Økonomisk Oversikt

16 Finland It should ease households worries that inflation will slow markedly in 29. This is due to special factors, such as falling interest rates and the VAT cut on food, which, coupled with a moderate oil price trend and slowing growth, will push inflation lower. There are risks, though. Wage increases are quite big, the increase in productivity will decelerate and the inflation spike may cause multiple effects. Housing market taking a breather The unrest in global financial markets has been reflected in Finland in sharply increased deposits with banks and stronger demand for corporate bank credits. Dramatic news headlines about the US housing market crisis have also occasionally weakened households willingness to borrow. However, the number of new housing loans granted at the beginning of the year was still higher than in the previous year and despite a slight slowdown, credit growth still runs at double-digit figures. The outlook for this year is moderately positive, as households have probably adjusted to the current interest rate level, which is reasonable from a Finnish perspective. The outlook for households finances for 2 is also robust, but the situation will start to worsen in 29 at the latest. Falling interest rates will certainly support demand for credits, but if the downturn is so hard that unemployment starts to increase, lower rates will not necessarily have as positive an impact as at the beginning of the decade. The pace of activity in the housing market has also normalised and households have become more cautious. The number of unsold new homes has increased and construction companies have cut down their production. Residential investment will decrease markedly this year. In Finland the rise in prices has been more moderate than, say, in the other Nordic countries, but a calmer period of a few years seems natural after an uptrend lasting several years. Room for tax cuts Public finances were even healthier last year than expected. A surplus of over % provides some room for manoeuvre in case households start to increase their savings. We expect VAT on food to be cut next year in line with general expectations. In addition, income tax is likely to be eased. It is, indeed, possible to make even bigger tax cuts, which might be implemented at a suitable time next year cycle-wise. Still, the cyclic situation is not the most important factor in favour of tax cuts. Structural reasons are more important. However, Finland cannot afford to ease the tax burden at the expense of the surplus targets for public finances. Reijo Heiskanen reijo.heiskanen@nordea.com Inflation to peak soon, but upside risks remain. % Inflation, CPI % Inflation, HICP Rise in housing prices to slow further 12. % y/y House prices New loans stable at high level 1 % y/y 17 New housing loans, M mov. avg., rhs Housing loans, stock 12M EURIBOR, reversed rhs Room for manoeuvre in state finances. % of GDP State financial balance % % y/y % of GDP Note: 12M mov. avg April 2 Økonomisk Oversikt

17 Sweden The Swedish economy is loosing momentum Swedish growth below the potential level. Inflation to drop below target next year. Riksbank to cut the repo rate to.%. US slowdown affects Sweden Black clouds are looming large on the horizon. US economic activity has stagnated and the financial crisis hampers growth and creates uncertainty also outside the US. The unfavourable trends on the other side of the Atlantic have already started to spill over to the Swedish economy. Exports to the US have declined sharply, interest expenses for some borrowers in Sweden have risen, equity prices on the Stockholm stock exchange have dropped and the weak USD has adversely affected many export sectors, notably the car industry. However, there are factors in the Swedish economy that limit the risk of a major slowdown. First of all the financial balances are in good shape, leaving room for fiscal stimulus packages, and the need to consolidate finances among businesses and households is limited. We expect that fiscal policy measures to the tune of SEK 2bn will be introduced. Swedish exports are moreover well diversified both regionally and in terms of products, which helps to alleviate the effects of the US slowdown. But Swedish economic growth clearly looks set to slow. As the slowdown will likely stretch well into 29, the Riksbank will have arguments to cut rates. Good start to 2 for exports after all After a very weak start to the year growth in exports of goods in 27 came to a meagre 2.%. Growth in exports of services was, however, strong, bringing total export growth to.%. The weak trend in goods export growth in 27 was partly attributable to the drop in exports to the US and partly to a weak trend in key export sectors. Demand in Europe was strong, though, and goods export growth picked up during the year. Monthly foreign trade statistics indicate that the good trend continued into 2. But growth in Swedish exports markets will decline going forward so export growth will slow from the current benign level. On the other hand, last year s weak development in key sectors is not likely to continue this year. We expect growth in exports of goods to run at - % both this year and next year. Owing to a stronger trend in exports of services total export growth may approach % in 2 and % in 29. Households have lost huge sums on stocks Export growth of -% is positive, but lower than the previous -year annual average of almost 7%. As noted above, Swedish foreign trade is not the only factor hit by the US slowdown. A rough estimate of the effect on household financial wealth of the drop in equity prices suggests that Swedish households have lost close to SEK bn from the peak in July 27 to early April 2. This figure represents as much as 2% of annual household consumption! Another key factor for households is the housing market. Over the past years house prices have risen at a healthy clip, boosting household wealth and, in turn, consumption. But in H2 27 the upturn in house prices came to an abrupt halt, partly as a result of the capital gains tax reform at the turn of the year. The Riksbank s rate hikes over the past years are probably also to blame for the stagnation in house prices, and this effect is of a more long-lasting nature. We expect house prices to remain relatively stable going forward. This, coupled with the decline in equity prices, means that households finances will change markedly compared with the previous years when they benefited from the surging asset prices. The plummeting equity prices have also significantly weak- Sweden: Macroeconomic indicators (% annual real changes unless otherwise noted) 2 (SEKbn) E 29E Private consumption 1, Government consumption Fixed investment industry residential investment Stockbuilding* Exports 1, Imports 1, GDP Nominal GDP (SEKbn) 2,2 2,7 2,9,7,229, Unemployment rate, % Employment growth Consumer prices, % y/y Underlying inflation, % y/y Hourly earnings, % y/y Real disposable income, % y/y Current account (SEKbn) % of GDP Trade balance, % of GDP..... General govt budget balance (SEKbn) % of GDP Gross public debt, % of GDP * Contribution to GDP growth (% points) 17 April 2 Økonomisk Oversikt

18 . Sweden ened households confidence in their own financial situation. However, on the positive side, household income growth is benign. Households disposable incomes will rise by 2.% this year and by an estimated 2.% in 29. The forecast for 29 assumes that the government introduces reforms to boost household finances by some SEK 1bn, thus lifting household income growth by.7% point. Despite solid income growth the outlook for consumer spending has deteriorated sharply. Wealth effects and increased uncertainty about future economic trends indicate that households will save more and that spending growth will lose momentum going forward. The slowdown in spending growth will mainly show through in 29, with consumer spending growth estimated to run at 2.% this year and 1.% next year. Investment has peaked - lower GDP growth After a very strong trend in 27 investment growth now seems to have peaked. We expect investment growth to more than halve this year from last year's strong rate of %. In 29 it looks set to slow down further to a level largely unchanged relative to 2. Particularly residential construction growth has levelled out and is even forecast to decline somewhat both this year and next year. Also, after several years of strong growth investment activity in other sectors of the economy will gradually slow in step with a weaker trend in demand. But investment in the energy sector and in infrastructure will remain brisk, the latter as a result of the government s expansionary fiscal policy.despite a good start to the year the slowdown in investment activity, the more cautious household behaviour and the elimination of unwanted inventories will cause GDP growth to slow to 2.1% this year from 2.% in 27. The downturn will continue well into next year, with GDP growth in 29 forecast to be 1.%. Labour market still strong, but GDP growth at some 2% or lower is clearly below the potential level estimated at about 2.%. The labour market is already showing clear signs of slowing momentum. The number of new jobs reported to job centres is declining, businesses hiring plans have been cut back and the downtrend in unemployment has been broken. But the effect of lower production growth generally tends to show through in employment with a considerable time lag. Hence, the labour market should remain tight in most of 2 and unemployment should not start to pick up until around year-end. The demographic development with a declining population of working age will dampen unemployment growth and the drop in employment should be moderate over the forecast period despite expectations of rising productivity. We therefore see unemployment rising from.9% this year to.% next year. A less tight labour market reduces the risk of increased wage drift. However, with the wage deals already in place total hourly wages should rise by around.% annually in 2 and 29. Slowdown in the manufacturing industry % y/y Net balance Order intake Order intake, business tend. survey, adv. M, rhs Source: Statistics Sweden and own calculations when growth slows in Swedish export markets % y/y Exports of goods Export market growth Uncertainty dampens consumer spending 7 % y/y 2 1 Income Household consumption % y/y Residential investment growth down 12 Apartments, ' Building permits, adv. 2Q, rhs Housing starts m2, ' Note: Q mov. avg. Forecast % y/y April 2 Økonomisk Oversikt

19 . Sweden Riksbank to cut rates in the autumn At the end of 27 CPI inflation was at a 1-year high. The high rate of inflation was driven by a few factors: rising mortgage rates and higher food and fuel prices. Excluding these items inflation was just around 1%, which is very low considering the strong economic trend of the past years. Much indicates that food prices will rise further near term, and at the same time wage increases will also to some extent show through in inflation numbers. The Riksbank s favourite target, the CPIX, should therefore pick up in the period ahead and peak at just below.% during the summer. After that, the effect of the sharp increase in fuel and food prices in 27 and this year will start to drop out of the 12-month index and inflation will move lower. Lower economic activity will also to an increasing extent curtail price pressures. We therefore expect CPIX inflation to move below the 2% target in 29. With a weaker economic trend, rising unemployment and inflation below target, rate cuts will gradually start to feature on the Riksbank's agenda. Much indicates that it will take some time before the Riksbank acts, though. GDP growth early this year is expected to be fairly high. Also, inflation is running high and the labour market should remain tight during most of the year. This is important as the Riksbank seems to attach great importance to present conditions. In addition, an inflation rate above target may keep inflation expectations a key factor for the Riksbank high. Towards year-end the signs of a slowdown will become clearer, and we expect the Riksbank to start cutting rates during the autumn. We see the repo rate at.% next summer. SEK to trade sideways this year This year EUR/SEK has traded in a range between the January high of 9. when expectations for Riksbank action were low and the financial market unrest widespread and a low of slightly under 9. after the Riksbank's surprise rate hike in February. We expect the SEK to trade at the lower end of this range in most of 2. The Riksbank is expected to cut rates this year while the ECB will not take similar steps until next year, and this will prevent the SEK from strengthening this year. However, in one year s time the SEK should appreciate towards 9.2 in step with the narrowing interest rate differential and fading financial market uncertainty. Risks tilted towards a weaker trend in 29 There is definitely a risk of a weaker trend than outlined above. The risk is related to a more profound effect of the US slowdown on the global economy than expected, which would further dampen Swedish export growth and to a greater extent adversely affect investment, household consumption and the labour market. In such a scenario the Riksbank would ease monetary policy more than envisaged in this report and the SEK would probably also display a weaker trend. Torbjörn Isaksson torbjorn.isaksson@nordea.com Investment in energy sector and infrastructure % y/y Government investments Energy investments % y/y Cooling of labour market Abs change y/y, ' Abs change y/y, ' Employment, rhs Vacancies, M lead - -7 Note: M mov. avg Lower inflation leaves room for rate cuts 1 % y/y 2-2 Repo rate, rhs CPIX CPI Still rough climate for the SEK. Bp EUR/SEK, rhs Dec Apr Aug Dec 2Y swap spread, vs Euro area Apr Aug Dec % Forecast EUR/SEK Apr Aug Dec Apr 7 19 April 2 Økonomisk Oversikt

20 USA Recession how deep and how long? The recession is probably a reality. The recession will most likely be mild. But a long period of weak growth is ahead. Risk of deeper and more protracted crisis. The US economy has deteriorated markedly over the past few months and it has now become more obvious that the financial crisis rooted in the housing market will have consequences for the real economy. At the time of our January issue of Economic Outlook it was still an open question whether the economy was heading for a recession, but now the question is rather how long and deep the recession will be. The most telling signs that the recession is now a reality are seen in the labour market. Employment in the private sector has fallen for four consecutive months by a total of,, and unemployment has risen to just over % up.7% point from last year s low. A similar trend has only been seen during previous recessions. Economic indicators point to further weakening of the labour market in the months ahead. But so far key data point to a relatively mild recession. On the other hand, much indicates that the slowdown will be protracted. More specifically, we look for slightly negative GDP growth in H1 2 followed by slightly positive growth rates in H2 2 and into 29. We do not expect to see durable economic growth at the potential level of an estimated 2½-% until end-29 at the earliest. In 2 as a whole we forecast GDP growth of a modest 1%, while the forecast for 29 is 1.%. We base our expectation of a long period of lacklustre growth on the very low household savings ratio coupled with growing job uncertainty, tighter credit standards and persistent house price declines. This cocktail will probably mean a very slow road to recovery of private consumption and the overall economy once the current recession is over. The gravity of the situation has made the Fed react very aggressively. The Fed has to date slashed the fed funds rate by bp to 2.2%, pumped liquidity into the money marked in concert with other central banks and eased the access to USD-denominated loans. In addition, the US government has pushed through fiscal policy easing of USD 1bn or just over 1% of GDP. Combined with the generally sound finances of nonfinancial companies and companies not related to the housing sector as well as continued solid exports, this significant economic policy easing is one of the reasons why the recession is expected to be relatively mild. But we see risks of a somewhat deeper crisis. The housing market is in the biggest slump since World War II, with house price declines so far of more than 1% from their peak. Much indicates that house prices will drop significantly lower, possibly weakening household demand further and thus the overall economy more than we have assumed in our baseline scenario. The Fed s aggressive action is positive for banks earnings and for homeowners with adjustable-rate mortgages. Still, further declines in house prices and employment could result in additional losses in the financial sector. Such losses may restrict lending to households and businesses considerably, which in turn could weaken the economy even more. USA: Macroeconomic indicators (% annual real changes unless otherwise noted) 2 (USDbn) E 29E Private consumption, Government consumption and investment 2, Private fixed investment 1, residential investment equipment and software non-residential structures Stockbuilding* Exports 1, Imports 1, GDP Nominal GDP (USDbn) 11,.9 12,.9 1,19.7 1,1. 1,2. 1,729. Unemployment rate, % Industrial production, % y/y Consumer prices, % y/y Consumer prices ex. energy and food, % y/y Hourly earnings, % y/y Current account (USDbn) % of GDP Federal budget balance (USDbn) % of GDP Gross public debt, % of GDP * Contribution to GDP growth (% points) 2 April 2 Økonomisk Oversikt