Economic and financial trends

www.danskeresearch.com

Investment Research

July 2012

Nordic OutlookEconomic and financial trends

• Denmark: Slow growth despite kick-start - European debt crisis is hampering the Danish economy. The kick-start will only ensure slow growth

• Sweden: Responsible yet responsive - Measly economic growth but room for monetary and fiscal easing

• Norway: Strong growth impulses - Growth is holding above trend, unemployment is falling and wage growth is higher than expected. Norway is performing strongly

• Finland: The worst is still ahead - We anticipate Finland sinking into a recession this year despite healthy economic structures

2 | July 2012 www.danskeresearch.com

Nordic O

utlook

Nordic Outlook

Danske Research

Editorial deadline 25 June 2012 Investment Research

Editor-in-Chief:

Steen Bocian

Chief Economist

+ 45 45 12 85 31

[email protected]

Macro economics:

Jens Nærvig Pedersen Denmark +45 45 12 80 61 [email protected]

Las Olsen Denmark +45 45 12 85 36 [email protected]

Roger Josefsson Sweden +46 (0)8-568 805 58 [email protected]

Frank Jullum Norway +47 85 40 65 40 [email protected]

Pasi Petteri Kuoppamäki Finland +358(0)105467715 [email protected]

Lauri Antero Uotila Finland +358(0)105467714 [email protected]

Signe Roed-Frederiksen US +45 45 12 82 29 [email protected]

Frank Øland Hansen Euro area +45 45 12 85 26 [email protected]

Anders Møller Lumholtz Euro area +45 45 12 84 98 [email protected]

John M. Hydeskov UK & Ireland FX/FI/Macro +44 (0)20 7410 8144 [email protected]

Flemming Jegbjærg Nielsen Asia +45 45 12 85 35 [email protected]

Lars Christensen Central and Eastern Europe +45 45 12 85 30 [email protected]

Lars Tranberg Rasmussen Fixed Income +45 45 12 85 34 [email protected]

Peter Possing Andersen Fixed Income +45 45 13 70 19 [email protected]

Arne Lohmann Rasmussen FX & Commodities +45 45 12 85 32 [email protected]

Allan von Mehren Global Economy +45 45 12 80 55 [email protected]

Morten Kongshaug Equities +45 45 12 80 57 [email protected]

Sales contacts:

Thomas Thøgersen Grønkjær Head of Danske Research +45 45 12 85 02 [email protected]

Rolf Kofod Head of Sales Copenhagen +45 45 14 69 92 [email protected]

Henrik Voetmann Mikkelsen Global Head of Equities +45 45 14 73 05 [email protected]

Anders Damgaard Derivatives Sales +45 45 12 85 50 [email protected]

Jesper Ronald Petersen FX/MM & Global Flow +44 (0)20 7410 8149 [email protected]

Bo Wetterstein Debt Capital Markets +45 45 14 72 83 [email protected]

Lars Worsøe Andersen Fixed Income +45 45 14 69 97 [email protected]

Torben Frederiksen Head of Sales and Sales

Trading, US

+1 212 293 0340 [email protected]

This publication can be viewed at www.danskebank.com/danskeresearch Statistical sources: Datastream, Ecowin, OECD, IMF, National Institute of Social and Economic Research, Statistics

Denmark and other national statistical institutes as well as proprietary calculations.

Important disclosures and certifications are contained from page 38 of this report.

mailto:[email protected]�

mailto:[email protected]�

http://www.danskebank.dk/analyse�



Nordic O

utlook

Nordic Outlook

Contents Denmark Slow growth despite kick-start 4 Forecast at a glance 12 Sweden Responsible yet responsive 13 Forecast at a glance 22 Norway Strong growth impulses 23 Forecast at a glance 28 Finland The worst is still ahead 29 Forecast at a glance 34 Global overview Euro crisis threatens global economy 35 Economic forecast 36 Financial forecast 37 The Nordic Outlook is a quarterly publication that presents Danske Bank’s view on the economic outlook for the Nordic countries. The quarterly publication the Global Scenarios sets out our global economic outlook.

Updated economic forecasts for the following countries and regions are available at www.danskebank.com/danskeresearch:

• Denmark • Sweden • Norway • Finland • US • UK • Eurozone • Switzerland • Central and Eastern Europe • Asia



Nordic O

utlook

Nordic Outlook

Denmark Slow growth despite kick-start

• The intensification of the European debt crisis is hampering the Danish economy. Hence, the outlook is for very low levels of growth in the coming years despite economic policy being eased significantly this year and the prospect of considerably less tightening in 2013 than previously estimated. The Danish economy appears to have stalled in the crisis-like state it has been in since 2008.

• We have become more skeptical about the Danish economy this year – on account of the European debt crisis – and expect growth of less than 1% despite the government’s so-called kick-start stimulus package. The outlook for next year is for growth of a little over 1%.

• Exports were the engine that kept the wheels of the economy turning last year. However, the weak outlook for the European economy, in particular, is undermining the prerequisites for high rates of export growth to continue. This has prompted us to revise down our expectations on exports.

• Consumption rose quite decently in Q1. Nevertheless, despite the release of early retirement scheme contributions, extremely low interest rates and tax cuts next year, we expect just limited consumption growth.

Euro crisis keeps Danish economy in the doldrums

The Danish economy is still struggling under the shadow of the crisis in Europe and there is little prospect of escaping the doldrums it has been trapped in since the financial crisis erupted in 2008. While there was some pick-up in the Danish economy in Q1, it was not enough to secure employment growth, and as house prices remain under pressure, according to Statistics Denmark, we must conclude that the crisis has not yet loosened its firm grip on Denmark.

We expect economic growth to pick up marginally during the forecast period. This is due, firstly, to our expectation of a slight improvement in the European economy in the coming years as some of the major issues raised by the current European debt crisis are gradually and hesitantly resolved. Second, Danish economic policy looks set to be less contractive than the government had previously indicated – firstly because developments in government investment in Q1 suggest that the impact of the so-called kick-start package on economic activity will be delayed relative to expectations. This has contributed to keeping growth muted in Q1 this year – but on the other hand it means that the expansive effects will come later, unless the kick-start simply has no effect at all. Moreover, public consumption growth has been so low that there is scope for expenditure to grow in both 2012 and 2013 without the government getting off course with respect to the 2020 plan or the recovery agreement. Next, the so-called investment window should result in private sector investments being brought forward to 2012 and 2013 –

Changes compared with previous forecast

Source: Danske Bank

We are also Europeans

06 07 08 09 10 11-9

-7

-5

-3

-1

1

3

5

-9

-7

-5

-3

-1

1

3

5GDP growth % y/y

Denmark

Eurozone

% y/y

Source: Statistics Denmark and Eurostat

2012 2013 2011 2012

GDP 0.9 1.2 1.1 1.2

Private consumption 1.3 1.3 0.6 1.1

Public consumption 0.0 0.7 -0.1 0.5

Gross fixed investment 3.0 0.7 2.1 -0.1

Exports 1.2 2.5 2.1 3.5

Imports 1.9 2.0 1.5 2.5

Gross unemployment (thousands) 163 161 163.1 163.2

Inflation 2.4 2.1 2.7 1.9

Government balance, % of GDP -3.7 -2.5 -4.0 -2.4

Current account, % of GDP 4.7 5.2 6.1 6.2

Current forecast Previous forecast


Nordic O

utlook

Nordic Outlook

which again should also help boost growth. And finally, the new tax agreement will help lift growth in 2013.

While there is the prospect of some improvement in the economy in 2013, we have to unfortunately conclude that growth this year looks set to be minimal. This is due to the eurozone crisis hitting European growth harder than expected, which in turn has had a negative impact on the Danish economy. This also means that employment is likely to fall further during the remainder of the year. We expect around a further 10,000 to be shed between now and the end of 2013.

Compared with our previous forecast, we have revised down our growth expectations for 2012, whereas we have maintained our expectations for 2013. We expect the Danish economy to grow by 0.9% this year and 1.2% next year. The lower level of growth in 2012 is due to the eurozone crisis looking set to be more severe and protracted than previously expected. The eurozone crisis also has implications for our 2013 forecast. The reason we have not revised it down is that we do not expect economic policy to be tightened to the extent previously assumed – in other words, it will be more expensive for the public sector to ensure even just modest growth in 2013. Disappointing employment figures for Q1 plus the uncertainty surrounding the European economy mean that we are a little more concerned about the labour market. We now expect, in contrast to our April forecast, that employment will fall slightly and that unemployment will therefore rise.

There are several major uncertainties in our forecast. The most important is the eurozone crisis. Should the crisis re-escalate, it would inevitably drag Danish growth lower. There is also considerable uncertainty attached to the effect of economic policy in Denmark: by how much will the returned early retirement contributions and the coming tax cuts boost domestic demand, what will be the impact of the investment window and will the government succeed in bringing forward public investments despite the disappointing figures in Q1? We have assumed that economic policy will largely have the effect expected by the government.

Slightly higher consumption growth but no upswing

Pension savers have been able to get their early retirement contributions returned tax-free since 1 April and many have made use of this option. The government announced that some DKK16.25bn had already been paid out by mid-May, which is not far short of our (and the government’s) forecast of payments amounting to just under DKK20bn in all. In light of this, the total payout may therefore end up being greater than expected. That said, we have to conclude that the impact on consumption has so far been less than expected. In fact, sales via Dankort (Danish debit card) indicate that consumption in April and May was basically at the same level as in Q1. Likewise, there are no indications that the early retirement money has been channeled into long-term savings, such as pension schemes or the paying down of debt. Instead, we have seen a seasonally-adjusted jump in household current account bank deposits of DKK8.4bn in April alone. It appears that consumers may be letting their money remain in the bank while they consider what to do with it. We should also point out here that consumption and

Growth stuck in first gear

Source: Statistics Denmark and Danske Bank

Returned early retirement contributions placed in the bank, not the shops

Source: Danish central bank (Nationalbanken) and Nets

-6

-4

-2

0

2

4

6

2006 2007 2008 2009 2010 2011 2012 2013

% growth in GDP

23500

24000

24500

25000

25500

26000

26500

445000

450000

455000

460000

465000

470000

475000

480000

485000

490000

Household demand deposits Dankort turnover (right)


Nordic O

utlook

Nordic Outlook

savings data exhibited unusually large fluctuations in February and March, perhaps due to seasonal adjustment issues connected with the leap year and Easter. Hence, developments here should be interpreted with caution.

We still estimate that the early retirement payouts should boost consumption by 0.25-0.5% in 2012. However, declining real post-tax incomes and low consumer confidence means that underlying consumption growth will be close to zero for the rest of the year – for, while falling oil prices and interest rates have improved the position of consumers, the worsening of the European debt crisis has undermined consumer confidence and resulted in a weaker outlook for employment. Basically, we have not become much more optimistic on behalf of consumers but we have nevertheless revised up our estimate for consumption growth in 2012 from 0.6% to 1.3%. This is due, in particular, to the positive surprise of private consumption rising by 0.3% in Q1, even though the indicators suggested a fall. True, the consumption of goods did actually fall by 0.3% but the consumption of services (excluding housing) rose by 1.3%. What exactly lies behind this increase is difficult to determine at the present time but it does nevertheless lift consumption higher for the year as a whole.

There is now a parliamentary majority for a tax reform that is essentially fully financed in the long term but which in 2013 will give households a tax break of close to DKK7bn, which will more than balance the tax hikes that will hit households due to the 2010 recovery plan. This is why we have revised up our consumption growth forecast for 2013 by 0.2 percentage points to 1.3%. Our expectation is still that consumption will be lifted by a fall in the savings rate, in particular as the situation in the housing market and the global economy becomes clearer. However, both factors have the potential to surprise either way. Given the high level of savings, a recovery in the housing market could prompt an actual upswing in consumption. On the other hand, the level of savings is merely sufficient to keep consumer debt more or less constant. If fears arise of further significant falls in house prices or a substantial increase in unemployment, we should count on savings rates increasing further.

Inflation down slightly this year

As expected, inflation has fallen in recent months as the effects of the pronounced price increases of last spring have faded from the statistics. Nevertheless, the decline has been faster than expected due to a sharp fall in the oil price, though we assess the fall to be temporary and expect the oil price to gradually return to February levels. We have therefore revised down our inflation forecast for 2012 but have revised it up for next year, when we expect prices to rise by 2.1%. That would make 2013 the fourth consecutive year with inflation above 2%, even though the Danish economy has been stagnant and has ample spare capacity. Rising duties and commodity prices are essentially what have kept inflation high despite low domestic inflationary pressures.

Manufacturing wages grew by just 0.1% in Q1 (seasonally-adjusted). Wage growth should pick up in the coming quarters as collective wage agreements come into force and local wage negotiations come into play.

Consumer confidence does not signal growth

92 94 96 98 00 02 04 06 08 10 12-15.0

-10.0

-5.0

0.0

5.0

10.0

-15.0

-10.0

-5.0

0.0

5.0

10.0Private consump-tion growth % Y/Y

Consumer confidence indicator

Source: Statistics Denmark

Consumption set back six years

05 06 07 08 09 10 11 12 13180.0182.5185.0187.5190.0192.5195.0197.5200.0202.5

180.0182.5185.0187.5190.0192.5195.0197.5200.0202.5

DKKbn per quarter,2005 prices

Private consumption


Energy and duties have lifted inflation

09 10 11 120.75

1.25

1.75

2.25

2.75

3.25

0.75

1.25

1.75

2.25

2.75

3.25% y/y % y/yCPI

Excl. taxesExcl. energy



Nordic O

utlook

Nordic Outlook

However, underlying wage pressures clearly remain modest, which is why we estimate that wages will rise by just over 2% a year. Thus, companies should experience further improvements in wage competitiveness while, in contrast, there is little prospect of employees seeing any real wage growth in 2013 – though the tax reform may mean they avoid an actual decline in real post-tax wages for the third consecutive year.

Low interest rates easing housing market pressures

House prices fell by a seasonally-adjusted 0.6% in Q1 compared with Q4 last year, according to the monthly house price figures from Statistics Denmark. Thus, the year started out with fresh price falls. However, it is worth noting that the decline in Q1 represents a marked slowdown compared with H2 last year, when prices fell by around 3% per quarter. Looking at home’s (estate agent) house price index, which stretches to May, house prices have been rising for three consecutive months. Thus, the housing market appears to be stabilising after the massive headwinds it faced last year.

Looking ahead, we expect the housing market to stabilise but do not expect prices to rise during the forecast period. Danish bonds have become a safe haven for investors seeking shelter from the euro crisis and that status should remain intact for now. The safe-haven status has secured record-low mortgage rates for homeowners and is helping to support the housing market – in fact, it has never been cheaper to borrow for a home. Pulling in the other direction is low wage growth, which looks likely to continue for the coming years. This is limiting people’s financial leeway for home buying. Moreover, potential buyers face tighter credit conditions and rising charges, as the financial sector remains under pressure.

Given the above, we expect that house prices will fall 6% this year compared with last year and a further 0.2% next year. What is important to note here is that the large price fall this year is technically due to the sharp decline in prices at the end of last year. As already mentioned, we expect the housing market to remain largely stable going forward.

Developments last autumn, when the housing market came under pressure in the wake of the escalation in the eurozone crisis, serve to underline the sensitivity of house price forecasts in the current financial climate. Should there be a further deterioration in the eurozone crisis that has an impact on the financial sector, that would, all else being equal, have a negative effect on the housing market and result in further price falls.

Wage adjustments keep unemployment in check

The labour market appears on the surface at least to have weathered the storm of recession and low growth in recent quarters – that is certainly the picture that emerges if you look at developments in unemployment. Unemployment has remained stable at around 160-162,000 since the euro crisis escalated in late summer last year. It would seem a surprisingly good sign if the slowdown that hit Denmark in the wake of the euro crisis flaring up again has not caused unemployment to rise.

However, looking instead at the employment figures, which provide a more comprehensive picture of the labour market, the story is rather different.

Housing market beginning to stabilise

06 07 08 09 10 11 1211000

12000

13000

14000

15000

16000

82.5

87.5

92.5

97.5

102.5

107.52006=100

House prices

<<Statistics Denmark

home>>

DKK per sq.m.

Source: Statistics Denmark and home estate agents

Low mortgage rates supporting housing market

98 00 02 04 06 08 10 120123456789

0123456789 % %

Avg short mortgage rate

Avg long mortgage rate

Source: Association of Danish Mortgage Banks (Realkreditrådet)

Stable unemployment – falling employment

07 08 09 10 1160000

80000

100000

120000

140000

160000

-3.0

-2.0

-1.0

0.0

1.0

2.0 % y/y

<<Employment, excl. leave

Gross unemployment>>



Nordic O

utlook

Nordic Outlook

Employment fell by 9,000 excluding leave – 4,000 from the public sector and 5,000 from the private sector – in Q1 12 alone, according to the preliminary National Account figures. On top of this comes the 7,000 excluding leave that lost their jobs in H2 11. Hence, the labour market is not stable, even if unemployment is. The latest fall in employment is indicative of a private sector suffering from weak demand and a public sector undergoing consolidation.

Given that the latest fall in employment has not occasioned a rise in unemployment, the labour force has obviously contracted. In fact, since last summer around 10,000 have left the labour force. Recent developments have clearly shown that the labour force is very sensitive to the economic cycle and that unemployment does not therefore give a full picture of the state of the labour market. The sensitivity of the labour force to the economic cycle is due to labour that leaves the country, students who remain longer in education, retirement from the labour market and people who drop out of the unemployment insurance or social security systems for one reason or another. Poor job prospects and negative real wage growth are probably two important reasons why the labour force has shrunk.

A number of factors should support the labour market going forward. Public sector employment has fallen in six out of the past seven quarters and has been a significant contributor to the decline in employment. However, the government has indicated it will increase public consumption, which we expect will be sufficient to halt the decline in the number of public sector jobs. We therefore expect public sector employment to remain stable around current levels for our forecast period. Moreover, we expect growth in the market sector of the Danish economy to support the private labour market – driven mainly by increased domestic demand combined with low wage growth, which should make labour cheap and dampen growth in unit labour costs.. In addition, construction sector employment may get a slight lift from the expansive economic policy.

In the short term, however, the leading indicators for the labour market point to a further deterioration. The corporate sector expects to shed jobs and has increased the number of lay-off warnings and cutbacks on job ads, while consumers expect to see unemployment rise. Hence, it would not surprise us to see a further worsening of the labour market in Q2 before the factors described above kick in and begin to dominate. Overall, our expectation is for employment to come in at 2,722,000 excluding leave this year, which is some way below last year. We see employment at 2,718,000 excluding leave next year. The lower level of employment is only likely to result in a modest increase in unemployment numbers this year, as we expect that a fair number of the people who lose their jobs will leave the labour force. This will mean average unemployment numbers of around 163,000 this year. The phasing in of the unemployment benefits reform next year will, despite unchanged employment, occasion a slight fall in unemployment. We therefore expect unemployment to average a little over 160,000 next year. Finally, it is worth noting that Statistics Denmark is expected to include unemployed persons on a self-chosen course of study in the unemployment statistics from the August count, which is released in September. People on self-chosen study courses

Many leaving the labour force

07 08 09 10 112.825

2.850

2.875

2.900

2.925

2.950

2.975

3.000

2.825

2.850

2.875

2.900

2.925

2.950

2.975

3.000Millions Millions

Work Force


Note. Labour force calculated as total employed excl. leave plus net

unemployment

ULC adjustments reduce need for lay-offs

00 01 02 03 04 05 06 07 08 09 10 11-3

-1

1

3

5

7

9

-3

-1

1

3

5

7

9% y/y % y/y

ULC, total economy


Negative expectations for labour market

08 09 10 11 12

-50

-30

-10

10

30

50

-50

-30

-10

10

30

50diffusion diffusionConsumers' unemployment

expectations

Construction employment expectations

Industry employment expectations



Nordic O

utlook

Nordic Outlook

have until now been counted as students. This is expected to raise unemployment numbers by around 2,000-2,500. We will be including this change in our next forecast, to be published in the autumn.

Kick-start slow in coming

In Q1, business investment reached its highest level since mid-2009. However, the pronounced increase was mainly due to major investments in aircraft and does not represent a shift in the propensity to invest, in our view. Business investment in the coming years should be boosted by the planned investments in the Copenhagen metro and the Femern bridge connection to Germany plus that part of the government’s kick-start package that concerns increased energy investment. The latter will be more fully felt in 2013, according to the plans. In addition, the Danish parliament has recently passed a proposal to increase the basis for a depreciation of private sector investments made before the end of 2013 by 15%. This should, all else being equal, encourage increased investment in the short term but on the other hand diminish the subsequent need to invest. Generally speaking, a sizeable backlog of investment has accumulated after a period of investment drought, though presumably a somewhat brighter economic outlook would be required for companies to seriously begin to invest again. The challenges facing the financial sector may also affect investment negatively, as the desire and ability of banks to extend credit may be limited by the consequences of the European debt crisis for the financial system. Nevertheless, the above-mentioned measures will, in our opinion, help secure business investment growth of 5.2% this year and 3.2% next year.

Part of the government’s kick-start for the Danish economy consists of boosting public investment this year. However, public investment fell in Q1 to below the quarterly average of last year. Thus we are still waiting for the government’s kick-start to materialise, though we nevertheless expect that the government will largely achieve its goal of increasing public investment this year. We will probably see a significant increase as early as Q2, very much like what happened in H1 last year. Public investment is scheduled to normalise next year. We therefore expect that public investment will increase by 7.9% this year and fall 17.2% next year.

Another aspect of the government’s kick-start is the refurbishment of publically subsidised housing. According to the plan this should happen this year and next. This type of investment comes under housing investment, which fell sharply in Q1. In other words, it would seem that this aspect of the kick-start is also delayed. It is therefore not unlikely that some of the refurbishment planned for this year will not commence until next year. Apart from this, we do not see the nascent stabilisation of the housing market as being sufficient to lift housing investment further. We therefore expect to see housing investment fall 2% this year and rise 4% next year. Overall, this adds up to fixed gross investment growth of 3% this year and 0.7% next year.

Kick-start disappointed in Q1

09 10 11 12

7.50

7.75

8.00

8.25

8.50

8.75

9.00

9.25

7.50

7.75

8.00

8.25

8.50

8.75

9.00

9.25 bn DKKNew public investment,constant prices


Aircraft imports temporarily boost investment

08 09 10 116

8

10

12

14

16

65.0

70.0

75.0

80.0

85.0

90.0bn DKK bn DKK

<<Gross fixed capital formation

Transport investment>>


Exports hit by eurozone crisis

04 05 06 07 08 09 10 11-15

-10

-5

0

5

10

15

-15

-10

-5

0

5

10

15% y/y % y/y

Exports of goods and services,constant prices



Nordic O

utlook

Nordic Outlook

Low market growth squeezing exports

Exports have managed to grow in recent quarters despite the escalating crisis in the eurozone – Denmark’s largest market. So, while export growth has been fairly modest, it is nonetheless positive that companies have managed to increase their overseas sales.

There are three factors that could help explain why Danish exports have fared reasonably well despite the prevailing economic conditions: 1) our key exports of food and medicines are steadily rising. Such necessities remain in demand, even during a slowdown; 2) Danish exporters have been increasingly successful at selling their goods in the growth markets – especially large, high growth economies such as Russia and China; 3) the competitiveness of Danish companies has improved markedly in recent years. Since 2007 we have regained around 15% of the competitiveness we lost in the previous years. This comes on the back of lower wage growth and higher productivity growth in Denmark than abroad, plus a helping hand from a weaker exchange rate. June saw the effective nominal krone exchange rate hit its lowest level since 2003. The weaker exchange rate has boosted competitiveness by almost 8% since December 2009.

The outlook would appear to be for very low growth in Denmark’s export markets this year – we expect just over 1%. Apart from the two crisis years of 2008 and 2009, you would have to go back twenty years to see such low export market growth. All else being equal, this limits the opportunities for companies to increase their overseas sales. When export market growth is low, companies are more dependent on their ability to capture market share in order to increase sales. Export market growth should be around 2% next year, which is closer to the norm. Given the outlook, we expect total exports to grow by around 1% this year and 2.5% next year.

Total imports rose healthily in Q1 due to a large import of aircraft. However, this should be viewed as a one-off effect, with imports likely to return to more normal levels in Q2. Rising domestic demand should generate a small increase in imports going forward – we expect private consumption to grow modestly and there is also the prospect of decent increases in business investment. In our view, this will add up to growth of 1.9% this year and 2.0% next year in the total import of goods and services.

The current account looks set to continue running large surpluses in the coming years, though the weak krone combined with higher import growth has eroded the surplus, which in recent months has been hovering somewhat below last year’s level. We expect the current account surplus to be reduced to around 4.7% of GDP this year, while rising exports and a stronger krone are likely to increase the surplus to around 5.2% of GDP next year.

Budget deficit set to increase this year

As well as the boost to investments described above, the government’s so-called kick-start for the Danish economy also includes increased public consumption. Going by the national accounts figures for Q1, the government needs to make a greater effort if it is to succeed in kick-starting the Danish economy. While public consumption grew modestly in Q1, it remained below the average quarterly levels of last year. According to its latest economic

Low krone exchange rate lends a helping hand to exports

00 02 04 06 08 10 1292.5

95.0

97.5

100.0

102.5

105.0

107.5

110.0

112.5

92.5

95.0

97.5

100.0

102.5

105.0

107.5

110.0

112.5

Nominal effective exchange rate

Source: Danish central bank (Nationalbanken)

Export market growth set to be subdued

Source: IMF WEO and Danske Bank

-5-4-3-2-1012345

1990 1994 1998 2002 2006 2010

% Export market growth


Nordic O

utlook

Nordic Outlook

report from May, the government calculates that public consumption will increase by 1.3% this year. However, achieving such high growth will be difficult, in our opinion. The picture emerging appears to be that the brakes were applied so forcefully last year that it will take time to get up to speed again. This clearly demonstrates the vulnerability of using fiscal policy to stabilise economic growth. We expect public consumption to be unchanged this year compared with last but that on the other hand it should increase by 0.7% next year.

The government’s kick-start plus the paying out of early retirement pension contributions will increase government expenditure this year and most likely push the budget deficit to the wrong side of the EU limit of 3% of GDP. If so, it will be the first time during the crisis that the budget deficit does not live up to the EU requirement. The early retirement pension payouts look set to total just under DKK20bn, as expected. In contrast, it is not a given that the government will succeed in spending all the money earmarked for the kick-start. All else being equal this will result in the deficit being smaller than initially assumed this year. Moreover, the relatively stable unemployment numbers will keep transfer income expenditure under control. Income-wise, government coffers will benefit from the considerable increase in oil prices that we saw at the start of the year. The value of crude oil exports hit a historical highpoint in April. However, oil prices have fallen back since then and new price increases will depend on developments in the global economy. All else being equal this will limit the tax revenues from North Sea oil for the remainder of the year. It is also very doubtful whether revenue from the pension yield tax will contribute just as much this year as it has done for the past few years. We therefore expect to see a budget deficit this year of around DKK70bn, or 3.7% of GDP. The government has committed to keeping the deficit within the EU requirement next year. The deficit will automatically be reduced relative to this year, as the paying out of early retirement contributions is a one-off expense that will disappear next year. We expect the budget deficit to amount to 2.5% of GDP in 2013. Our estimate of the 2013 budget deficit assumes (like the government’s estimate) that capital pension taxation will generate public income of DKK5bn next year. However, the estimate is subject to great uncertainty. The L&P industry estimates total capital pension funds at around DKK475bn. If all of the funds are taxed next year, income from this tax will be about DKK175bn, which – all else being equal – would ensure a large budget surplus.

Large budget deficits this year and next are unlikely to increase Denmark’s EMU debt. On the contrary, the EMU debt will probably fall this year to 45.1% of GDP and further next year to 42.4% of GDP compared with 46.5% of GDP last year. The reason why the debt is falling is that the central government has already largely financed the deficits, which are technically covered by drawing on the central government’s account at Nationalbanken – hence, the EMU debt is not affected. However, this is not the same as the debt not rising. Indeed, the public sector net debt is set to increase as a result of the continuing deficits but one could say that, with regard to the EMU debt, Denmark has paid the bill up front.

Brakes sticking

07 08 09 10 11104

105

106

107

108

109

110

111

104

105

106

107

108

109

110

111

Public consumption,constant prices

bn DKK bn DKK


Budget deficit to exceed EMU ceiling this year

05 06 07 08 09 10 11 12 13-4

-2

0

2

4

6

-4

-2

0

2

4

6 % of GDP

Gov. balance

EU criterion (-3 % of GDP)

% of GDP


EMU debt falling

05 06 07 08 09 10 11 12 1325

30

35

40

45

50

25

30

35

40

45

50% of GDP

EMU debt

% of GDP



Nordic Outlook

Denmark: Forecast at a glance

National account 2011 2010 2011 2012 2013

DKK bn (current prices)

Private consumption 867,9 1,9 -0,5 1,3 1,3

Government consumption 511,3 0,3 -1,0 0,0 0,7

Gross fixed investment 309,8 -3,7 0,4 3,0 0,7

- Business investment 186,9 -4,3 -3,5 5,2 3,2

- Housing investment 83,3 -7,4 8,8 -2,0 4,0

- Government investment 39,6 8,5 3,8 7,9 -17,2

Growth contribution from inventories 2,8 1,0 0,4 0,0 -0,1

Exports 957,2 3,2 6,8 1,2 2,5

- Goods exports 599,4 3,7 5,9 0,0 2,4

- Service exports 357,8 2,5 8,1 3,2 2,6

Imports 862,5 3,5 5,2 1,9 2,0

- Goods imports 562,4 3,9 5,2 1,5 2,1

- Service imports 300,1 2,8 5,2 2,6 1,9

Growth contribution from net exports 94,7 0,0 1,1 -0,2 0,3

Gross domestic product 1786,5 1,3 1,0 0,9 1,2

Economic indicators 2010 2011 2012 2013

Current account, DKK bn 97,4 118,2 86,7 98,0

- % of GDP 5,6 6,6 4,7 5,2

General government balance, DKK bn -44,0 -32,8 -68,0 -48,0

- % of GDP -2,5 -1,8 -3,7 -2,5

General government debt, DKK bn 752,8 830,9 830,0 805,0

- % of GDP 42,9 46,5 45,1 42,4

Employment, ex. leave (thousands) 2751,3 2741,3 2721,8 2718,0

Gross unemployment (thousands) 164,5 162,1 163,0 160,5

- % of total work force (DST definition) 6,3 6,2 6,2 6,2

Oil price - USD/barrel 80,0 112,0 108,0 116,0

House prices, % y/y 3,0 -3,0 -6,0 -0,2

Hourly earnings in industry, % y/y 2,6 2,3 1,9 2,1

Consumer prices, % y/y 2,3 2,8 2,4 2,1

Financial figures 26-06-12 +3 mths +6 mths +12 mths

Repo rate, % p.a. 0,45 0,10 0,10 0,10

2-yr swap yield, % p.a. 0,72 0,65 0,70 0,75

10-yr swap yield, % p.a. 1,90 1,75 2,00 2,20

EUR/DKK 743,3 743 743 745

USD/DKK 614,2 599 590 573


Nordic O

utlook

Nordic Outlook

Sweden Responsible yet responsive • There has been no end to the praise poured on the Swedish economy

over the last few years and to some extent it is well deserved. The rule-based stable fiscal policy and similarly rule-based monetary policy with a floating exchange rate regime instigated after the financial crisis of the early 1990s have served the Swedes well.

• Thanks to solid economic policies and strong fundamentals Sweden has become an investment destination of grand stature in the wake of the global financial crisis, meaning high demand for Swedish assets and hence a strengthening currency, especially in real terms.

• The improved terms of trade have gradually started to weigh on the export industry, which is why sequential production growth rates have come down rapidly over the last few quarters.

• It is not only the currency that creates headwinds for the export industry. The encouraging signs from major export markets in the winter and early spring have taken a turn for the worse and the European woes have not only accelerated but spread from the periphery to the core, clouding the outlook and thwarting demand for Swedish exports.

• As of yet, it is nonetheless hard to discern any major impact on the domestic sectors but developments in the export industry have always provided a blueprint for subsequent domestic developments in the small open Swedish economy. In short, we remain cautious on domestic consumption in general and domestic investments in particular.

• Taken together, we believe that GDP growth will be a measly 0.5% y/y this year, representing, nonetheless, an upward revision of 0.75pp compared with our previous forecast. The main impetus behind this change was a surprisingly strong Q1 GDP outcome. Next year we estimate still meagre 1% y/y GDP growth, which is a downward revision of 0.5pp compared with our previous forecast. The main motivations are large and increasing downside risks to external demand and a slight deceleration of domestic demand, especially in terms of private investments.

• Given low demand growth, low resource utilisation and low inflation, we feel the Riksbank has most arguments in place to start lowering rates again. The timing of such action is inherently difficult to predict, as the Riksbank majority obviously does not agree. We have, tentatively, therefore, called for additional repo rate cuts in September and December.

World GDP and investments growth

Source: National Institute for Economic and Social Research

(NIESR), Danske Bank calculations


Nordic O

utlook

Nordic Outlook

In the beginning...

...policymakers created demand. Extremely loose economic policy, with record-high fiscal deficits, ultra low interest rates and quantitative measures, has given rise to strong global growth in the wake of the global financial crisis. Global GDP growth came in just shy of 4% y/y in 2011, down from a hefty 5% y/y in 2010 but still above the historical average. Over the forecast horizon, Danske Bank expects global GDP to grow by around 3.5% y/y, which also happens to be very much in line with historical averages.

Despite apparently still decent global GDP growth rates, the geographical distribution of demand growth is unfortunately concentrated on markets with small Swedish industrial presence; hence, we expect the impact on Sweden to be less visible. In addition, we expect the lion’s share of global demand to be directed towards product types unfavourable to the investment goods laden Swedish exports industry. To complicate things further, traditional Swedish export markets are marred by large risks due to fiscal and external positions purporting acute financial weaknesses – something that is already visible in, for example, a strengthening Swedish exchange rate.

The more relevant measure of international demand from a Swedish perspective is growth in import demand on Swedish export markets – ‘world market growth’. This measure rose by more than 5% in 2011, which goes a long way to explaining the handsome Swedish export growth last year. World market growth is, nonetheless, expected to post a more subdued 3% in 2012, only to accelerate somewhat again in 2013.

Recently released national accounts data suggests that Swedish exports grew by above 7% y/y in 2011 but with an apparent and strong deceleration in the second half of 2011. The strong developments in Swedish market shares over the past two years is even expected to turn into a loss of market shares as the global economic cycle matures, with global demand becoming ever more directed towards consumption goods and under influence of a continually stronger SEK. In 2012, Danske Bank estimates that Swedish exports will manage to eke out only 0.5% y/y growth and that stark loss of market share for the Swedish export industry will continue in 2013 – albeit at a slower pace, as Danske Bank forecasts exports will rise by almost 2.5% y/y.

World markets and Swedish exports growth

Source: NIESR, National Institute for Economic Research (KI),

Statistics Sweden (SCB), Danske Bank calculations


Nordic O

utlook

Nordic Outlook

And financial markets said...

...despite international developments being perhaps the main prerequisite for gauging future developments in a small, open economy such as Sweden, increasingly important factors are the more interdependent stance of economic policy and financial conditions. It is not enough to consider only monetary policy rates; other elements that have a bearing on the access and price of capital – such as the exchange rate, asset prices, fiscal policy, etc. – should also be included. Furthermore, we like to measure the real impact of financial conditions to control for the effect of inflation. One way – albeit disputed – to capture the overall real stance of financial conditions is through a financial/economic conditions index (FCI/ECI). Even though such an aggregated measure cannot fully capture the true overall financial stance or take into account the interaction of different financial markets and economic policy, we feel it is a neat way to visualise the direction and basic stance of financial variables.

First, after hiking rates for the best part of last year, incoming data forced the Riksbank to – albeit reluctantly – cut interest rates in December and in February. Since then, the Riksbank has been on a policy pause but we believe that economic conditions warrant further policy action and that, come autumn, the Riksbank will start cutting rates anew (at the latest).

Recent price developments also imply that financial conditions have instead become less expansionary. As inflation is set to subside further, additional Riksbank cuts are necessary to balance the negative impact on real conditions of lower inflation, especially as market interest rates are kept stubbornly high. Danske Bank also expects asset markets to develop sideways, or in some instances – the housing market for example – to even come down somewhat throughout the forecast horizon. To make matters worse, and despite foreseen interest rate cuts, a higher interest rate level and strong fundamentals set Sweden apart from many of its competitor nations and have served to strengthen the Swedish krona, especially in real terms. These developments all serve to tighten the expansionary modus of overall financial conditions.

Given the solid position of government finances, there is also room to expand fiscal policy throughout the forecast period. Indeed, the centre-right coalition with Finance Minister Anders Borg has recently executed measures worth approximately SEK10bn including a cut in value-added taxes on catering services, which will reduce structural surpluses. Our estimates also point to additional fiscal space of at least SEK20bn throughout the forecast period, implying that structural surpluses above the legislated 1% target will be substantial. However, thus far, there is little evidence that the government is about to embark on a spending spree of any kind.

Summing up, predominantly due to low interest rates and a still undervalued currency, financial conditions are generally very expansive, underpinning real growth for the foreseeable future. Nonetheless, as inflation recedes, the SEK strengthens further, wealth effects become negative, real financial conditions will move towards neutral, thus removing some of the support to growth.

Financial conditions gradually becoming less expansionary

Note: MCI is FX and interest rates, FCI I is MCI plus the stock

market, FCI II is FCI I plus house prices, ECI is MCI plus the cyclically

adjusted government balance; a number above 100 implies that

financial conditions and/or economic policy are supportive to

growth, whereas a number below 100 indicates that financial

conditions and/or economic policy is contractionary; all measures

are adjusted for inflation and quoted in volume terms

Source: NIESR, KI, SCB, Danske Bank calculations


Nordic O

utlook

Nordic Outlook

Unusually stable investments growth foreseen

High international and domestic demand rapidly absorbed the large pool of unused capital in the wake of the financial crisis. Together with credit being readily available and reasonably priced, this has caused gross fixed capital formation (investments) to rise continually since Q2 09. Despite this, the level of investments has not yet reached pre-crisis levels and capacity utilisation has risen virtually unabated, indicating negative net investments.

A continued need to replenish worn-out production capacity and replace obsolete production capacity, hence making room for a restructuring of the Swedish economy, implies that the outlook for investments should indeed be benign. Take into account a structural deficit of housing and the forecast for investment growth should become brighter still.

Then again, in the face of the large downside risks to demand stemming from the ongoing crisis in many of Sweden’s most important export markets, companies express a high level of uncertainty, which raises the bar for any investment project undertaken. Also, very high leverage in the household sector complicates the outlook for housing investments, despite generous fiscal incentives to remodel and refurbish the housing stock.

Public investments are expected to remain on a high level throughout the forecast period, with large investments in infrastructure and other high-profile public investments. Despite this, in terms of contribution to growth, the zest for public investments has probably been lost when looking into H2 12 and 2013.

All in all, investment growth – historically a source of large swings in overall GDP growth – is expected to chalk up a decent 5.6% y/y in 2012 after an even better showing of 7.0% y/y in 2011. In 2013, continued international woes affect the investment outlook more profoundly, which is why gross fixed capital formation is set to grow by less than 2% y/y.

Low productivity a boon for labour markets

Ever since the onset of the financial crisis in 2008 or – to be more precise – back in 2007 (remember sub-prime?), Swedish labour market behaviour has been enigmatic. To put it bluntly, labour markets have developed more strongly than they should given the steep fall in the level of demand. In part, this is due to what some observers describe as a flexible reaction from both trade unions and employers: A larger reduction in hours worked in exchange for a not as large cut in payrolls and wages kept know-how intact and unemployment in check. Most economists, however, judged this as traditional labour-hoarding behaviour, which by definition would cause lower productivity. Given the rigidity of (hourly) wages, this would in turn lessen profits and eventually lead to further reductions in the workforce. However, this gambling on the part of employers did actually pay off, as demand returned with a vengeance after just a few quarters. Fortunately – at least from a labour market perspective – productivity has remained abnormally low for a recovery phase, which is why employment has managed to creep back to the levels seen before the crisis and the unemployment rate has also receded – albeit still high – from the peak levels in 2009.

Investments remarkably stable


Labour markets steady as she goes



Nordic O

utlook

Nordic Outlook

Resurgent anxiety surrounding public finances in a number of important developed countries during the summer signifies a more pronounced slowdown in Swedish production and hours worked – something that is visible in a few important labour market indicators. Assuming cyclical patterns are still more or less intact, employment should not increase much in 2012 and 2013 – effectively producing somewhat higher unemployment rates given a structural influx of labour. The projected increase in unemployment rates is nonetheless subdued. Early next year it should peak below 8%, a little above the current level of 7.5%.

The developments in labour markets described above underline structural challenges facing the Swedish economy, especially in the context of longevity of unemployment that infests certain segments of the population. Also, recent large revisions to data on hours worked and employment have provoked a plethora of medium- to long-term changes in estimates of potential growth rates and/or long-term unemployment rates from a number of forecasters. This rhymes well with Danske Bank’s long-held view of a structural shift taking place in conjunction with the financial crisis.

Disposable income growth falling off a cliff

Albeit not outright falling, the weak growth in hours worked and employment over the forecast horizon will produce a large shift in households’ real disposable income growth, despite reasonably strong developments in hourly wages. After growing by an impressive 3% in 2011, this year should produce almost as impressive income growth of 2.8% y/y. However, next year, disposable income growth is set to recede dramatically to 1%. Furthermore, wealth effects are also net negative (house prices expected to fall and equity prices grow no more than what nominal GDP growth suggests), further cementing weak preconditions to household consumption.

However, we have chosen to assume a return to a more normal savings rate, which balances out the strong impetus to weaker household consumption from lower incomes. Overall, Danske Bank expects consumption growth to fall from the 2% y/y recorded in 2011 to 1.9% y/y in 2012 and reach a more historically compatible 2.3% y/y in 2013.

Despite our calculations suggesting that there is structural fiscal space in the magnitude of SEK20-30bn, the recent budget proposal – pertaining to 2012 – contains very few additional expenses and the municipalities remain hamstringed by legislative balanced budget rules. To put it bluntly, Finance Minister Borg seems determined to construct a fiscal buffer when continually amortising government debts. Nonetheless, Danske Bank anticipates that some, but not all, of the fiscal resources will be put into use. Overall public consumption growth should recede from 1.8% y/y in 2011 to 0.7% in 2012 and increase to 1.2% y/y 2013.

Savings rate takes a beating

Source: NIESR, KI and SCB, Danske Bank calculations


Nordic O

utlook

Nordic Outlook

From a stabilisation policy perspective, the current overly cautious public finance stance raises some difficult questions. The only viable explanations for this behaviour would be if the government deems that economic risks are clearly tilted to the downside. A skewed forecast space would indeed warrant a higher fiscal caution than point estimates convey. However, this would also mean that as financial and economic (downside) risks subside, fiscal policy must be expanded if the economy is not to be over-taxed or under-stimulated (depending on political preferences). Following the rhetoric of Finance Minister Borg this does not currently seem all that likely. However, maybe, just maybe, government officials are currently about to produce a considerably more stimulative autumn fiscal bill.

Another, admittedly more speculative, explanation for the overly cautious stance is considerably less appealing as it suggests that the government – including Finance Minister Borg – to some extent mistrust ministry of finance forecasts. If the government indeed bases its caution on another less optimistic (long-term) view of the Swedish economy, with higher unemployment rates, lower incomes, etc, than the official forecasts say, this would of course go a long way to explaining the reluctance to stimulate. However, if this is the case, one might wonder why its (long-term) forecasts are not revised accordingly.

The inventory situation

Ever since the height of the financial crisis in the winter of 2008/09 and the concurrent significant global destocking, there has been strong demand growth, in particular an unconventionally strong domestic demand growth, which has lifted import demand in a fashion seldom seen before. This has served to keep net exports at unconventionally depressed levels for a protracted period of time, whereas inventories have contributed strongly to growth throughout the recovery phase. However, the past few quarters have demonstrated stronger positive developments in external demand for Swedish export products and relatively stable developments in domestic demand. As a result, the net export contribution to GDP growth has been on the increase over the past few quarters. National accounts data suggests a net export contribution to GDP for FY 2011 of 0.7pp y/y. Given weak prospects for global growth, we nonetheless expect negligible contributions to GDP growth over the forecast horizon. With inventories expected to develop much less exuberantly with inventory levels again needing to become balanced to a weaker demand situation, we expect a significant negative inventory contribution to GDP growth in 2012 and a more growth-neutral impact in 2013.

Net exports bleak by historical standards



Nordic O

utlook

Nordic Outlook

Summing up GDP

Above we examine some of the main elements of the Swedish business cycle. Last year resulted in handsome 4% y/y GDP growth, despite a very weak ending to 2011. The low starting point this year was nonetheless balanced by a strong start to 2012, which is the main impetus of our upwardly revised forecast for 2012. Preliminary data released so far point to renewed weakness in Q2. When summing up the GDP components for the forecast years, it becomes apparent that 2012 will be marred not only by a low starting point but also by weaker export growth and an inventory cycle that revolves fully. Our calculations point to a dismal growth of 0.5pp y/y in 2012. Looking further ahead, the small open economy of Sweden will have to fend off a stronger currency and severe fiscal belt tightening across export markets, which despite some alleviation from domestic economic policy will hold back exports growth. In short, in 2013, Danske Bank expects Swedish GDP growth to reach 1.0% y/y.

The GDP, hours worked and productivity nexus

As touched upon previously, productivity (output per hours worked) has been surprisingly weak since 2007 and we have continually been too optimistic on this measure. This has also been the main reason for our simultaneous overestimating of the unemployment rate in the aftermath of the financial crisis. We finally saw the first signs of improvement in productivity in late 2010 and this continued into 2011. Unfortunately, the latest round of national accounts data revealed stark negative revisions to already weak productivity developments in the aftermath of the financial crisis, clouding the positive image of the productive Swedish business sector further. This nonetheless goes well with our less optimistic view on potential growth rates, where we have assumed that there is still obsolete capital that has to be worked off. Looking ahead, this capital overhang together with weak, even negative, demand growth serves as an explanation for a startlingly low productivity forecast. Swedish productivity nonetheless grew 2.5% in 2011 but we expect it to fall 0.6% y/y in 2012 and post a feeble 1.3% y/y in 2013. Under any circumstances, this is far below the norm for the Swedish economy.

Taken together with the recently negotiated wage increases, these developments will keep cost pressures high and might even hinder an even stronger monetary policy reaction to the deteriorating outlook. The reason is that labour costs, mainly wage driven, are expected to top productivity growth by a large margin. Unit labour costs (ULC), which adjust for the wage earners’ share of productivity gains, are expected to rise by a very uncompetitive 4.7% y/y this year and a still high 1.8% y/y 2013. Nonetheless, and as mentioned above, weak external and domestic demand, i.e. low resource utilisation, will restrain the inflationary impact from high ULC, and these pressures will prevail, eventually leading ULC lower. However, in the near term, high ULC might become a hindrance to a more swift and decisive reaction from the Riksbank, which is particularly worrying as the results of monetary policy rules and most econometric models clearly necessitate negative real interest rates.

Productivity nowhere in sight



Nordic O

utlook

Nordic Outlook

The Riksbank and the inflation target

Given the weakening global outlook, it would be easy to conclude that inflation worries should be put firmly to rest. However, and as our most recent Nobel laureates have indicated in their research, inflation might still take off due, inter alia, to the tremendous economic-political stimuli that have been, and are still being, implemented. Some speak even of hyper inflation as some central banks are seen as monetising government debt and credibility for fiscal policy is imperative for a modern fiat-currency. Yet, downside risks materialising are most likely to produce a situation that can easily be described as a depression – a deflationary spiral combined with a dysfunctional financial sector unable to transfer any economic policy stimuli.

However, in our main scenario, the above risks remain contained and the credibility of economic policy remains high. Growth as well as inflation will eventually return – in a controlled fashion. Prices on internationally traded goods and Swedish import prices will normalise. Domestic inflation and so-called ‘core inflation’ (CPI excluding food, energy and interest rates) are both principally derivatives of wage developments, and given our view on future wage developments, we believe that domestically generated price indices are set to normalise as well.

Thanks to our much below consensus estimate of the long-run potential of the Swedish economy, where long-term potential GDP growth is approximated to be 1.5% y/y, the weak GDP developments envisaged push resource utilisation only somewhat lower. Subsequently, inflation rates should start to inch up during 2013, as the marginally higher consecutive growth rates start to eat away at the vast surplus resources in the Swedish economy and cost pressures start to build. This will, however, not be enough to push inflation anywhere near the Riksbank inflation target (2% y/y).

Short term, Danske Bank believes that inflation will not only undershoot the inflation target of 2%, but even approach deflationary levels, measured both in terms of headline (CPI) inflation and in terms of the operative (CPIF) inflation variable. This is set to happen as previously high price rises fall out of the CPI calculations and the general deterioration in the outlook feeds into prices. For this year, we expect CPI inflation to fall back and average 1% y/y. In 2013, we expect CPI inflation to move more in tandem with CPIF inflation and we believe it will reach close to 1.5% y/y by the end of our forecast period. It is only in 2015 that we estimate inflation will reach the Riksbank’s 2% target.

Resources more strained than generally perceived

Source: NIESR, KI, SCB and Riksbank, Danske Bank calculations


Nordic O

utlook

Nordic Outlook

Despite the recent cuts in the repo rate, the Riksbank strives from ultra low, in real terms even negative, interest rates towards normalising interest rates. For most of last year, this work was undone by rising inflation, effectively keeping real rates stuck in negative territory. Any qualms surrounding potential estimates and the concept of neutral rates aside, given current uncertainties on the economic and monetary policy outlook, the Riksbank must tread cautiously. Inflation forecasts undoubtedly point to much lower inflation, which serves to tighten economic policy at the same time that interest rate rules of all kinds suggest that the economy is in dire straits and in need of more stimuli. Given that rates are close to the nominal interest rate floor, additional stimuli is hard to come by, which is also why we believe there are still solid arguments for the Riksbank to continue lowering rates.

A ‘normalisation’ of (real) interest rates means the Riksbank will raise the cost of capital and the rate of what economists call creative destruction, perhaps to an extent that is excessive given a weak demand situation in our surrounding world. Understandably, and maybe looking beyond our forecast horizon, the Riksbank will for many years to come be forced to strike a fine balance between the need to support the economy in the face of apparent downside risks and the need to support productive reallocation of capital and other resources to the most viable parts of the economy.

The lopsided risks when close to the nominal interest rate floor nonetheless warrant a proactive reaction from the central bank. We therefore expect the Riksbank to continue lowering the repo rate in 2012 and reach 1.0% by the end of the year. Of course, escalated financial and economic turmoil could warrant a more rapid and stronger reaction from the Riksbank and, likewise, a more pronounced return of confidence and growth in Swedish export markets could very well make further cuts seem unnecessary.

In applying strong focus on the attractive economic fundamentals of Sweden vis-à-vis most other developed countries, we expect the SEK to strengthen over the coming period. On a 12-month horizon, we believe that a EUR will cost about 8.50 and the USD should also become cheaper and trade around 6.54. Furthermore, we see no fundamental reason why the SEK should underperform either the EUR or USD from an even longer perspective. Do keep in mind though that SEK has historically had a hard time performing in periods of elevated financial stress, such as after the financial collapse of 2008/09.

Riksbank to cut, but only reluctantly

Source: Riksbank, Danske Bank calculations


Nordic O

utlook

Nordic Outlook

Sweden: Forecast at a glance

Forecast

National accounts 2011 2010 2011 2012 2013

SEK bn Vol growth in %

Private consumption 1664.1 3.7 2.0 1.8 2.4

Government consumption 928.2 1.9 1.8 0.2 1.2

Fixed gross cap formation 642.3 7.7 6.2 5.5 1.7

Stocks* 40.6 2.1 0.7 -1.8 -0.4

Domestic demand 3234.6 3.9 2.8 2.1 1.9

Exports 1750.5 11.7 6.9 0.1 2.4

Aggregate demand 5025.7 8.1 4.6 0.2 1.8

Imports 1533.3 12.7 6.3 -0.1 3.5

Net exports* 217.3 0.3 0.7 0.1 -0.3

GDP 3492.5 6.2 3.9 0.3 1.0

- GDP, Calendar adjusted 5.9 4.0 0.5 1.0

* contribution to GDP growth

Economic indicators 2010 2011 2012 2013

Trade balance, SEK bn 86.4 92.9 92.3 86.0

in % of GDP 2.6 2.7 2.6 2.4

Current Account, SEK bn 229.3 242.8 245.4 242.3

in % of GDP 6.9 7.0 6.9 6.6

Public sector savings, SEK bn 0.0 3.5 -17.8 -21.9

in % of GDP 0.0 0.1 -0.5 -0.6

Public debt ratio, % of GDP* 39.8 38.4 38.4 38.6

Unemployment, % of labour force 8.4 7.5 7.5 7.6

Hourly wages, % y/y -1.2 3.3 3.9 2.5

Consumer prices, % y/y 1.3 3.0 1.0 0.8

* Maastricht definition

Financial figures 26/06/2012 + 3 mths + 6 mths + 12 mths

Repo-rate 1.50 1.25 1.00 1.00

2-yr swap yield 1.79 1.85 1.80 1.90

10-yr swap yield 2.34 2.35 2.65 2.65

SEK/EUR 880.1 870 860 850

SEK/USD 701.8 702 683 654

Source: Danske Markets


Nordic O

utlook

Nordic Outlook

Norway Strong growth impulses • The Norwegian economy appears once again to be unscathed by the

European debt crisis. Growth is holding above trend, unemployment is falling and wage growth is higher than expected.

• Although oil prices have come down, there is still the prospect of very high levels of oil investment. Improved terms of trade mean strong growth in real household disposable income, which is being amplified by low interest rates and inflation. Private consumption and housing investment are therefore also set to perform well.

• Weaker global growth has still not hit the export industry particularly hard.

• The labour market remains tight, with low unemployment. Employment growth is likely to be somewhat higher than anticipated and wage growth is holding up. Low global price impulses are keeping inflation down.

• Norges Bank has left interest rates alone since March and is currently signalling an initial rate hike around the new year. We continue to expect a first hike in December, with rates climbing further in 2013 and 2014 than the market is currently anticipating.

Oil-fuelled upswing

The Norwegian economy still seems to be relatively unscathed by the European debt crisis. Oil investment is rising faster than anticipated and making a big contribution to growth in the Norwegian economy – both directly through increased activity and indirectly through strong income growth. Healthy profitability and low unemployment should ensure further solid real wage growth for Norwegian households in 2012 and 2013, resulting in consumption growth of 3-4%. Strong house price inflation and rapid population growth should also ensure high housing investment in 2012, which will make a solid contribution to growth in mainland GDP. The labour market remains tight, with low unemployment and higher growth in wages and employment than expected. The European debt crisis has also led to falling mortgage rates. Strong growth in house prices and high levels of debt in the household sector leave the Norwegian economy vulnerable to interest rate shocks, which could force the central bank to raise rates faster than predicted in its latest monetary policy report.

•

Strong income growth

Source: Reuters EcoWin, Danske Markets

Oil prices still high

Source: Reuters EcoWin


Nordic O

utlook

Nordic Outlook

Consumption growth picking up

After slowing towards the end of last year, growth in private consumption has picked up again. We expect real household disposable income to rise by more than 4% both this year and next. With low unemployment, low interest rates, high house prices and expansionary fiscal policy, it is unlikely that savings will rise significantly from today’s high levels. We therefore expect consumption to grow by close to 4% both this year and next. Retail sales were also somewhat stronger than anticipated during the first four months of 2012 and are well on track to hit this level.

Households’ strong finances are also affecting the housing market. Prices are still climbing, the average time to sell is falling, and the stock-to-sales ratio is continuing to come down. All in all, house prices rose by around 9% in 2011 and have gained almost 2.5% so far this year. Besides the wealth effect that this will gradually exert on consumption, high prices in the market for existing homes will also ensure strong growth in housing investment. Housing investment climbed by 22% last year, adding just over one percentage point to mainland GDP growth.

We expect housing investment to climb by maybe another 15% this year based on order data. Recently, however, figures for housing starts have been somewhat weaker than expected, and growth in lending to households has slowed. In isolation, this could indicate that activity in the housing market is slowing, but the pressure in the market for existing homes does not support this. It is therefore more likely that the slowdown is due to bottlenecks on the supply side rather than dwindling demand, in which case prices could climb even further.

After a decade of continuous increases in house prices and debt levels, households’ financial position is increasingly being seen as a risk factor. Norway is one of few Western countries where households are more heavily indebted (measured as the ratio of debt to disposable income) than they were before the financial crisis in 2007-08. Nominal house prices have also risen considerably and are now 17% above their previous peak in 2007.

That said, it appears that the rapid rise in house prices is due principally to strong growth in real disposable income and extremely low real interest rates. There is no empirical evidence that Norway is experiencing a housing bubble in the classic sense of price rises being fuelled chiefly by expectations. Real house prices deflated by disposable income have not risen prohibitively either. Nor is there anything to suggest overinvestment in the Norwegian housing sector. Quite the opposite, it seems that homebuilding is failing to keep up with demand. There are also signs that banks’ credit standards for households have actually tightened as advised by the FSA.

On the other hand, household debt levels are getting very high, and this, as the financial crisis showed, can present a threat to both the financial system and the real economy. Although the tightening of the rules on the loan-to-value ratio has succeeded in curbing credit growth, it is still higher than income growth, which means that debt levels are rising. We expect this to make its mark on rate setting in Norway over the next couple of years.

Consumers stage a comeback


Housing investment slows unexpectedly



Nordic O

utlook

Nordic Outlook

Norges Bank has also taken explicit account of financial imbalances in its interest rate forecasts since March.

Continued optimism

Strong impulses from the oil sector have helped shield the Norwegian economy from a period of weaker global activity and great financial turmoil. Activity levels are more or less normal, and growth has been above trend, translating into an increase in capacity utilisation. Leading indicators are signalling continued optimism, albeit still with some variation between sectors. Activity in oil-related industries, retailing, services and construction is approaching boom levels, and even the export industry, which has naturally been hit hardest by the turmoil, seems to be keeping its head above water.

For the Norwegian economy as a whole, it appears that the risk of a serious downturn is still limited. Norges Bank’s latest regional network survey indicates annualised growth in the mainland economy of around 3.6% in Q2, which is more than in the previous survey. Following a stock-driven correction in April, the PMI climbed to 54.9 in May. Actual industrial production has been weaker than indicated by the PMI, but there is a much stronger correlation if we look at manufacturing turnover, which is a good illustration of how the improvement in Norway’s terms of trade via higher producer prices is at least as important as the increase in activity.

As mentioned above, oil investment will make another strong contribution to growth this year. According to Statistics Norway’s investment survey, oil investment will rise by around 27% in current prices in 2012, which probably translates into a contribution to growth in the mainland economy of around 1.2 percentage points. Although some of the investment demand from oil companies in the Norwegian sector will be met by imports, investment levels are also high in oilfields beyond the North Sea. This spells high levels of activity for the Norwegian supply sector. The first survey to cover 2013 also shows that the oil companies anticipate further investment growth of 13% next year.

Strong demand in the housing market, coupled with considerable purchasing power due to high wage growth and low mortgage rates, has resulted in strong growth in prices for existing homes. Prices are therefore back to levels where it is profitable for developers to embark on new housing projects. We estimate that housing investment will climb by almost another 15% this year. Although figures for housing starts have been weaker than anticipated, there is much to suggest that this is due to bottlenecks on the supply side rather than dwindling demand. In this case, weaker investment growth should result in further tightening of the market for existing homes, which spells even stronger growth impulses from housing investment further ahead.

Further strong growth

Source: Norges Bank, Danske Markets

Record-high oil investment – again

Source: Statistics Norway, Danske Markets


Nordic O

utlook

Nordic Outlook

Higher wage growth

The most compelling evidence that the European debt crisis has had little impact on the Norwegian economy comes from the labour market: employment has risen significantly and unemployment is lower than expected. LFS unemployment was 3.2% in March (February-April), while the decline in registered unemployment from the Norwegian Labour and Welfare Administration (NAV) appears to have ground to a halt in the period through to May. Employment growth was 2.3% y/y in March, up from around 1% last summer, and leading employment indicators are signalling further healthy growth, albeit somewhat down on Q1. We are forecasting employment growth of almost 2% this year, which is enough to keep LFS employment down at 3% for the next couple of years.

The most important signal concerning possible contagion effects from the euro crisis in the Norwegian economy has come from this year’s pay deals. Given the turmoil abroad and the threat of job losses in Norway, many predicted moderate wage settlements this spring, but strong demand for some types of labour (including in industry), low unemployment and healthy profitability have resulted in wage growth more or less in line with last year. Now that most of the big pay deals have been finalised, it would seem that we need to revise up our wage growth forecast from 4.0% to 4.2%. Pay talks in the public sector have been particularly fraught, and the arguments used by the unions indicate that we could be looking at a wage spiral, which is the big risk with wage growth in an oil-based economy.

With a relatively strong krone and fierce competition in the retail sector, pressure on consumer prices will remain moderate even with wage costs rising somewhat. The strengthening of the dollar in recent months may nevertheless put some pressure on prices for imported consumer goods, many of which come from Asia and are priced in dollars. The effects of low electricity prices will gradually drop out of the data, pushing inflation up, but we also expect the drop in oil prices to feed through further into petrol prices and help drag down core inflation.

No signs of wage restraint

Source: Norwegian Technical Calculation Committee for Wage

Settlements (TBU), Danske Markets

Domestic inflation creeping up



Nordic O

utlook

Nordic Outlook

Norges Bank must rise to the challenge

Weak growth and tight fiscal policy have put downward pressure on interest rates in neighbouring countries and this has pulled Norwegian rates down too despite limited consequences for the real economy to date. The problem is that interest rates are probably so low that domestic growth impulses are becoming overly strong, creating a headache for Norges Bank, although there will still be leeway for monetary policy for as long as the inflation outlook remains moderate.

On the other hand, the risk associated with low interest rates will increase for as long as economic growth remains above trend and debt levels continue to grow. Unless the global crisis puts a damper on growth in the Norwegian economy in the near future, economic policy will therefore need to be tightened. The chances of fiscal policy contributing to this are not particularly good: public expenditure is set to grow far faster than GDP this year, which means that fiscal policy is stimulating rather than reining in the mainland economy. The job will therefore have to be done by the central bank through gradual increases in interest rates.

Norway’s strong economic data and solid financial position put it in a special position among the Western economies and this will probably lead to a stronger krone once global financial markets regain their risk appetite. The analyses in this report indicate that growth differentials will become more apparent over the next couple of years, and we believe that this, together with continued high oil prices, will result in a stronger import-weighted exchange rate than seen towards the end of 2011.

Wider yield spread and stronger krone



Nordic O

utlook

Nordic Outlook

Norway: Forecast at a glance

Forecast


NOK bn Vol growth in %

Private consumption 1091.4 3.7 2.4 3.5 3.8

Public consumption 548.2 1.7 1.5 1.5 2.1

Gross fixed investment 520.0 -5.2 6.4 8.3 8.8

Petroleum activities 138.7 -9.0 13.4 15.0 7.0

Mainland Norway 367.7 -2.5 8.0 1.4 6.6

Dwellings 113.8 -2.2 22.0 4.4 9.8

Enterprises 172.3 -0.2 2.6 0.6 5.5

General government 81.7 -7.5 3.0 -1.0 4.4

Mainland demand 2007.3 3.1 3.2 3.4 4.4

Total domestic demand 1868.5 0.0 0.0 0.0 0.0

Growth contribution from stockbuilding 66.7 2.4 0.3 -0.6 -0.1

Exports 932.0 1.8 -1.4 1.1 0.6

Crude oil and natural gas 371.6 -4.8 -6.2 1.6 -3.9

Traditional goods 283.0 2.5 -0.4 2.0 2.7

Total demand 3158.2 2.7 2.0 2.7 3.3

Imports 751.3 9.9 3.5 1.2 5.0

Traditional goods 454.1 8.1 5.3 2.9 4.6

Growth contribution from net exports 180.7 -2.1 -1.0 -0.3 -0.2

GDP 2406.9 0.7 1.4 2.8 2.5

GDP Mainland Norway 1956.9 1.9 2.4 3.3 3.5

Other posts 2010 2011 2012 2013

Employment, % y/y -0.1 1.4 1.9 1.5

Labour force, % y/y 0.3 1.0 1.7 1.4

Unemployment (LFS), % 3.6 3.3 3.1 3.0

Annual wages, % y/y 3.6 4.2 4.2 4.5

Consumer prices, % y/y 2.4 1.2 1.1 1.6

Core inflation 1.4 0.9 1.4 1.6


Deposit rate 1.50 1.50 1.75 2.00

2y swap rate. % 2.62 2.80 3.05 3.20

10y swap rate, % 3.39 3.30 3.65 3.95

EUR/NOK 7.48 7.50 7.40 7.40

USD/NOK 5.97 6.05 5.87 5.69



Nordic O

utlook

Nordic Outlook

Finland The worst is still ahead

• GDP grew unexpectedly robustly during Q1. Working-day adjusted GDP grew by 1.7% y/y. Full-year GDP rose 2.9% in 2011. Domestic demand boosted the economy but significant headwinds have continued to mount due to the euro crisis. Export-driven companies face fewer new orders and retail sales fell in April.

• We have revised our outlook for Finland to reflect better-than-expected Q1 12 figures: GDP is now forecast to grow 0.5% in 2012. We anticipate Finland sinking into a recession in Q2 and Q3 as the temporary lifts seen in Q1 fade away. For 2013, we expect sluggish growth of 1.5%, because the weak euro area outlook continues to hurt the export-oriented Finnish economy.

• Finnish exports have significantly underperformed growth in export markets, partly due to the high weight in investment goods, partly due to poor competitiveness and also in part due to Nokia’s downscaling. We anticipate a small further fall in exports in 2012 but risks are balanced.

• We expect employment to hold up fairly well, assuming that most companies will rely on temporary lay-offs, reduced hours and other soft methods, as was the case in 2009.

• With relatively low debt and well capitalised banks, domestic sectors in Finland have been able to avoid the negative impact from the euro crisis so far. Strong domestic factors buffer employment and the cost of public debt against external shocks. Granted salary increases preserve the purchasing power.

• We expect investments to decline slightly in 2012. Low interest rates continue to help the domestic sectors, especially the housing market.

GDP expected to decline in the following quarters

Gross domestic product rose by 0.8% in January-March compared with the previous quarter. Working-day adjusted GDP grew in Q4 11 by 1.7% y/y. Growth was based on private consumption, which increased by a remarkable 5.8% y/y. We anticipate Finland sinking into recession in the coming quarters as the temporary lifts seen in Q1 fade away. Wage increases and a one-off EUR150 payment to nearly all employees in the first months of the year supported consumers. Also, a tax hike in April on motor vehicles gave individuals and businesses incentive to time purchases in Q1.

Industrial production decreased -2.2% y/y in Q1 as energy and mining industries faced a substantial decline compared with the previous year. Construction production increased in Q1 by 2% y/y due to an increase in renovation construction while new housing production declined. Service

GDP growth is expected to halt after a decent Q1


Private consumption source of growth in Q1

Source: EcoWin


Nordic O

utlook

Nordic Outlook

sector volumes increased by 3% y/y although public services and finance industries remained fairly flat.

Recent business surveys show that weak expectations continue to dominate in the manufacturing and construction industries. Confidence indicators for manufacturing companies declined in May as the value of new orders decreased in April by -20.2% from the corresponding month in the previous year. This is a clear indication that the euro crisis is going to have a negative effect on the export-driven Finnish economy. Construction confidence also plummeted to a level last seen in August 2010. Granted building permits and housing starts already decreased in January-March from the previous year. Service and retail sales confidence on the other hand has remained strong despite recent falls in sales figures in April and May.

Continued tension in the euro area is affecting Finland mainly via the export sector. Exports are likely to decrease, uncertainty causes CAPEX to be postponed, and private consumption is expected to level down from unusually fast growth figures. During 2012 we expect the GDP to increase 0.5%. We have also revised our estimate for 2013 slightly downward to GDP growth of 1.5% as we see no fast solutions being implemented to resolve the euro crisis. Needless to say, a full-blown financial crisis in the euro area started by a disorderly Greek exit from the euro zone or an Europe-wide banking collapse from Spain would not leave the Finnish economy untouched.

Consumer spending and inflation set to decline

Consumer confidence has increased since the end of 2011. In May, confidence was near its long-term average. As mentioned, private consumption was the main component behind the growth figures in Q1. However, there are signs that the trend is nearing its end. In fact, retail trade volumes decreased by -2.2% in April versus the corresponding period the year before. Also, registrations of new motor vehicles in May dropped by -30.8% compared with May 2011. These figures support our view of a corrective adjustment in private consumption in Q2.

The steady employment level and low interest rates should help to sustain private activity but growth experienced in Q1 is not sustainable. Nominal wages increased by 3.8% y/y in Q1 12. Real incomes rose by only 0.7% y/y as consumer prices increased by 3.1% in April and May. We expect private consumption to grow 2.2% y/y in 2012 before moderating to growth of 1.5% in 2013.

Inflationary pressures are easing as energy prices have declined and the increases of several indirect taxes are now behind us. Inflation has declined continuously since July 2011, not taking into account the two spikes caused by tax increases in January and April. In May, inflation stood at 3.1%. We expect an annual average of 2.8% in 2012. Approximately one percentage-point of inflation originates from tax changes. Inflation should decrease during the year as the impact from expensive commodities as well as from one-time tax hikes are passing. We expect inflation to average 2.4% in 2013 despite the announced VAT tax increase from 23% to 24%.

Manufacturing confidence worrisome


Real wages expected to remain stable



Nordic O

utlook

Nordic Outlook

Investing activity expected to fall

Investments rose 1.5% y/y during Q1, in line with GDP. Housing investments fell slightly by -0.4% y/y but the volume of investments in machinery, equipment and transport equipment rose by 6.6% y/y. Given the substantial fall in business confidence and uncertainty in the financial markets, manufacturing CAPEX and business construction are not likely to rise further in 2012. Housing construction continues to look lucrative because the gap between selling prices and construction costs is wide but construction companies have become cautious. The number of granted building permits has fallen since the end of 2011. Construction companies do not want an overhang of supply, which would depress the price level. We forecast investments to fall -1.0% y/y in 2012. In 2013, especially housing construction is in a position to grow as interest rates remain low. Thus we expect investments to increase 1.5% in 2013.

Exports hindered by the euro crisis

The volume of exports fell by -0.2% y/y In Q1 12. Full year 2011 exports were down by only -0.8%. Finnish exports have been lagging behind growth in international trade, which could emanate from the large share of metal engineering, paper and other cyclical industries. CAPEX is still weak in several export markets. Nokia has continued to cut down production in Finland, which has had a long-term impact on Finnish exports. Preliminary information from Finnish harbours indicates a small deterioration in Q2 12. The export of services performed badly in 2011 but an improvement was observed in Q1. It is good to bear in mind that large statistical revisions are common, especially in services exports.

The outlook for the main Finnish export markets in Germany, Russia and Sweden has remained relatively stable. Exports to Russia have risen somewhat less than expected but Russia still has good growth potential. Finland cannot escape a European recession, in our view; the value of exports to EU countries has slowly fallen. Exports outside the EU have risen but are not large enough to fully compensate. Given the large weight of cyclical forest and metal industries, we forecast exports to fall by -1.5% in 2012. Assuming a short recession in the euro area and a better global outlook, we expect exports to rise by 1.5% in 2013. Finland had a current account surplus from 1994 to 2010 but fell into a small deficit in 2011. We expect a current account deficit also in 2012-13, driven by weak exports and stable imports. The deficit is forecast to be around 1% per GDP, which does not pose a major threat in the near future. An improvement in the outlook could reverse the deficit back into a surplus.

Machinery and equipment investments to decline


No sign of pick-up in exports



Nordic O

utlook

Nordic Outlook

Housing market benefits from consumer confidence

The prices of dwellings in old blocks of flats and terraced houses increased by 0.6% m/m in the whole country in April, according to recent preliminary figures. Compared with the corresponding period of the year before, prices were also 0.6% higher in the whole country and rose by 1.3% in the Helsinki Metropolitan Area. Generally speaking, housing prices have been flat since summer 2011. Sales are at normal levels in smaller apartments, while larger houses take much longer to sell.

Housing construction declined 5% y/y in March. That decline has now continued since the autumn of 2011. This limits the supply and is expected to continue as the permits for new housing constructions went down by 30% y/y in March. Uncertainty regarding the general economic outlook is putting a dampener on the housing market and selling times have consequently increased. On the other hand, low interest rates and a decent employment outlook keep demand relatively stable. We expect real prices in the housing market to decline in 2012. Even nominal prices could decline modestly but we do not see a major risk of a bubble as prices have generally risen in line with earnings. A major decline would be initiated only by much higher long-term unemployment and surging interest rates, which both look unlikely.

Tax hikes ahead

The coalition government – including the conservative National Coalition Party, Social Democrats, Leftwing Alliance, Green Party, Swedish People’s Party and Christian Democratic Party – increased taxes on alcohol, tobacco, gasoline and sugar in January, bringing the consumer price index nearly one full percentage point higher. Tax income rose 11% y/y in January-April. Some savings were also implemented, ranging from forestation subsidies to defence expenditure. Initially, the new government aimed at EUR1.25bn in new tax annual revenue largely from consumption taxes and a similar amount of annual savings. Starting from the year 2013, the coalition government has agreed to an additional net saving of EUR2.7bn. Approximately half of this will be achieved by increasing the VAT and taxes on income. The other half will come from spending cuts from all areas of the government. These measures should narrow the budget deficit considerably and the main focus should now be the long-term solutions, such as increasing the labour force participation rate via increased retirement age, which would take into account the future liability of the ageing population.

Finnish participation in the European bail-outs shows in the national debt. This year the capital need for the ESM has added EUR1.44bn to the general government debt, which is likely to exceed 51% per GDP.

Public consumption rose by 1.0% on Q1 12 y/y. Tight budgets are likely to keep growth in public spending in the coming years well below 1%. Room for expansionary fiscal policy has been used, even if Finland is one of the least indebted euro area countries. The remaining space for fiscal expansion is being reserved as a buffer against major shocks and future demographic changes.

Within the euro area, the Republic of Finland continues to enjoy one of the lowest risk premiums compared to Germany. The triple-A rating might be

Budget deficit improving, current account negative



Nordic O

utlook

Nordic Outlook

under review but the effects from a possible downgrade are likely to be limited. We expect the fairly low level of public debt, excellent track record and policy decisions to continue to keep Finnish risk premiums low and credit ratings high.

Relatively stable employment outlook

The labour market is starting to show some signs of a weaker outlook but we expect employment to remain fairly stable. The number of unemployed in April was 226,000, which was 6,000 higher than a year earlier. The seasonally-adjusted unemployment rate rose by 0.1 percentage point to 7.7 even if the number of employed persons was 9,000 higher than in April 2011. The labour force participation rate was 68.5%, which was 0.3% higher than a year ago. The ageing trend will limit the supply of labour in the coming years.

We expect the unemployment rate for FY 12 to be 7.9% and 8.0% in 2013. The number of employed persons is likely to fall slightly in late 2012, while the labour supply is likely to stop growing, keeping the unemployment rate in control. Lost manufacturing jobs are largely replaced by jobs in the service sectors. The natural rate of unemployment is likely to be around 6% given that unemployment rates are stubbornly high in some rural areas. New vacancies at employment offices stood at 48,000 in April, which is 1,000 positions more than a year ago.

Unemployment rate expected to remain constant



Nordic O

utlook

Nordic Outlook

Finland: Forecast at a glance

Forecast


Volume, y-o-y %

GDP -8.4 3.7 2.9 0.5 1.5

Imports -16.4 7.7 0.1 0.0 1.0

Exports -21.5 7.8 -0.8 -1.5 1.5

Consumption -1.7 2.2 2.7 2.0 1.1

- Private -2.7 3.0 3.3 2.2 1.5

- Public 1.1 0.2 0.8 0.8 0.5

Investments -13.3 2.6 4.6 -1.0 1.5

Key Performance Indicators 2009 2010 2011 2012 2013

Unemployment rate, % 8.2 8.4 7.8 7.9 8.0

Earnings, % 4.0 2.6 2.7 3.0 2.5

Inflation, % 0.0 1.2 3.4 2.8 2.4

Current account, Bn, EUR 3.4 3.3 -1.0 -1.8 -1.2

Current account/GDP, % 2.0 1.8 -0.5 -0.9 -0.6

Public deficit/GDP, % -2.5 -2.5 -0.5 -1.0 -0.5

Public debt/GDP, % 43.5 48.4 48.6 51.0 51.5

Forecasts: Sampo Bank/Economists


Repo rate, % 1.00 0.75 0.75 0.75

2 year swap rate 0.84 0.85 0.90 0.90

10 year swap rate 1.91 1.75 2.00 2.20

EUR/USD 125.4 124 126 130

Source: Danske Markets * Forecasts: Sampo Bank/Economists


Nordic O

utlook

Nordic Outlook

Global overview Euro crisis threatens global economy • The global economy has shown worrying signs of slowing recently.

US growth has gone from moderate to soft growth, China has failed to recover and the euro recession has deepened.

• We expect growth to remain weak in the US in coming years and the euro area to stay around recessionary levels, while we see some stimulus driven recovery in China.

• The euro crisis has gone to a critical level. While we believe the euro will survive, we expect the crisis to continue for many years.

Lack of global growth engines

The global economy has lost momentum lately, as US activity is losing steam after a strong start to the year. The euro crisis seems to be weighing on global sentiment keeping spending subdued. Chinese growth has also failed to recover this year despite a sharp decline in inflation that has freed up spending power. However, construction activity has remained weak and exports have slowed due to the recession in Europe and softening US growth.

The short-term outlook is very blurred and risks are generally high. The euro crisis has reached a critical stage again and it is unclear how long this bout of uncertainty will persist. Even though there was some relief following the Greek election, which raised the probability that Greece will remain in the euro, there are many fires burning in the euro area – not least in Spain. Worryingly Italy has also started to catch fire again, as political stability is once again weakening, because the Italian people feel the pain of austerity and are increasingly showing support for euro-sceptic politicians.

Tensions remain elevated – but euro should survive

Our main scenario is that the euro remains intact but that uncertainty continues to be significant and hence dampens business and consumer sentiment – and thus economic activity.

A few mitigating factors are underpinning the global economy at the moment. First, oil prices have fallen substantially from close to USD130/bl to less than USD100/bl. Second, bond yields in ‘core’ countries are record low. Finally, monetary policy is being eased and, in the case of China, fiscal policy is becoming expansionary again.

We look for growth to remain soft in the US in H2 12, as consumption is sluggish, investment growth subdued and fiscal spending in negative territory. In 2013 we expect growth to meet further challenges from a stronger pace of fiscal tightening. The euro area is likely to be close to recessionary levels in H2 as the euro crisis remains a strong drag. In China we look for some recovery in growth driven by monetary and fiscal stimulus. This would be likely to provide some support to the euro economy as exports to Asia are key for euro area growth.

Activity rolling over

Note: G3 is US, Euro area and Japan

Kilde: Reuters EcoWin, Danske Markets

China and the Euro area hand-in-hand

Note: G3 is US, Euro area and Japan

Kilde: Reuters EcoWin, Danske Markets


Nordic O

utlook

Nordic Outlook

Economic forecast

Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.

Macro forecast, Scandinavia

Denmark 2011 1.0 -0.5 -1.0 0.4 0.4 6.8 5.2 2.8 6.2 -1.8 46.5 6.62012 0.9 1.3 0.0 3.0 0.0 1.2 1.9 2.4 6.2 -3.7 45.1 4.72013 1.2 1.3 0.7 0.7 -0.1 2.5 2.0 2.1 6.2 -2.5 42.4 5.2

Sweden 2011 4.0 2.0 1.8 6.2 0.7 6.9 6.3 0.7 7.5 0.1 38.4 7.02012 0.5 1.8 0.2 5.5 -1.8 0.1 -0.1 0.1 7.5 -0.5 38.4 6.92013 1.0 2.4 1.2 1.7 -0.4 2.4 3.5 -0.3 7.6 -0.6 38.6 6.6

Norway 2011 2.4 2.4 1.5 6.4 0.3 -1.4 3.5 1.2 3.3 - - -2012 3.3 3.5 1.5 8.3 -0.6 1.1 1.2 1.1 3.1 - - -2013 3.5 3.8 2.1 8.8 -0.1 0.6 5.0 1.6 3.0 - - -

Macro forecast, Euroland

Euroland 2011 1.4 0.2 0.0 1.5 0.1 6.4 4.0 2.7 10.2 -4.3 88.3 -0.22012 0.1 -0.3 -0.6 -0.6 -0.4 2.0 0.2 2.5 11.1 -3.7 90.7 0.12013 1.2 0.7 -0.4 2.1 0.0 3.8 2.8 1.8 10.9 -3.3 90.9 0.2

Germany 2011 3.1 1.4 1.4 6.6 -0.1 8.4 7.5 2.5 7.1 -1.3 81.8 5.12012 1.4 1.1 0.9 2.7 0.0 4.3 4.7 1.8 7.2 -1.1 81.1 4.52013 2.2 1.6 0.8 5.7 0.0 4.6 5.0 1.8 7.0 -0.8 79.8 4.3

France 2011 1.7 0.3 0.9 2.9 -1.9 5.0 4.8 2.3 9.3 -5.9 85.6 -3.22012 0.7 0.3 0.4 1.4 2.1 3.6 0.9 1.8 9.7 -5.5 89.4 -3.02013 1.3 1.4 0.1 2.7 0.0 4.3 4.1 1.5 9.6 -5.3 92.0 -2.9

Italy 2011 0.5 0.2 -0.9 -1.2 0.0 6.3 1.0 2.9 8.3 -4.1 120.5 -3.62012 -1.1 -1.4 -1.5 -2.9 -0.6 3.2 -0.9 2.0 8.8 -2.4 120.7 -3.12013 0.7 0.8 -0.4 1.4 0.0 4.1 4.1 2.0 9.0 -1.3 119.5 -2.4

Spain 2011 0.7 -0.1 -2.2 -5.2 -0.5 9.0 -0.1 3.0 21.0 -8.5 69.8 -2.92012 -1.6 -2.1 -4.9 -5.8 0.4 2.2 -2.2 1.2 23.1 -5.9 80.9 -2.52013 -0.5 -0.4 -3.0 1.5 0.0 4.5 4.3 1.4 23.9 -5.3 85.5 -2.5

Finland 2011 2.9 3.3 0.8 4.6 - -0.8 0.1 3.4 7.8 -0.5 48.6 -0.52012 0.5 2.2 0.8 -1.0 - -1.5 0.0 2.8 7.9 -1.0 51.0 -0.92013 1.5 1.5 0.5 1.5 - 1.5 1.0 2.4 8.0 -0.5 51.5 -0.6

Macro forecast, Global

USA 2011 1.7 2.2 -2.1 6.8 -0.2 6.7 4.9 3.1 8.9 -8.7 99.0 -3.12012 2.3 2.1 -2.3 7.6 0.3 6.4 5.3 2.3 8.0 -8.1 105.0 -3.42013 2.6 2.5 -1.2 7.7 0.0 7.6 6.9 2.1 7.3 -6.1 110.0 -3.6

Japan 2011 -0.7 0.0 2.1 0.6 0.1 0.0 5.8 -0.3 4.5 -10.1 229.7 2.02012 2.3 1.6 2.1 4.4 0.0 6.2 4.7 0.0 4.3 -9.2 235.0 2.02013 1.6 1.0 1.1 2.1 - 6.8 5.2 0.2 4.2 -8.0 240.6 2.4

China 2011 9.2 - - - - - - 5.4 4.3 -1.2 33.0 2.82012 8.2 - - - - - - 2.9 4.3 -1.5 26.0 3.12013 9.1 - - - - - - 3.1 - -1.0 22.2 3.4

UK 2011 0.9 -0.8 0.5 -2.0 1.1 4.8 2.0 4.6 8.0 -8.3 82.5 -2.02012 0.3 0.2 -1.0 2.0 1.3 2.7 3.3 2.8 8.8 -8.0 88.4 -1.52013 1.9 2.0 -1.8 2.0 1.3 4.5 3.5 2.2 9.2 -6.5 91.4 -1.2

Year GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2Current

acc.4Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Infla-

tion1

Unem-

ploym.3

Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3Public

budget4

Current

acc.4Public

debt4

Unem-

ploym.3Public

budget4

Public

debt4Year

Year GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2

Current

acc.4GDP 1

Private

cons.1Public

cons.1Fixed

inv.1Stock

build.2Ex-

ports1

Im-

ports1

Infla-

tion1


Nordic O

utlook

Nordic Outlook

Financial forecast


Bond and money marketsCurrency

vs USDCurrency

vs DKK

USD 26-Jun - 592.8+3m - 599+6m - 590

+12m - 573

EUR 26-Jun 125.4 743.3+3m 124 743.0+6m 126 743.0

+12m 130 745.0

JPY 26-Jun 80.4 7.37+3m 82 7.36+6m 84 7.01

+12m 86 6.65

GBP 26-Jun 156.1 925.4+3m 154 929+6m 154 906

+12m 155 887

CHF 26-Jun 95.8 619.0+3m 97 619+6m 95 619

+12m 92 621

DKK 26-Jun 592.8 -+3m 599 -+6m 590 -

+12m 573 -

SEK 26-Jun 701.8 84.5+3m 702 85.4+6m 683 86.4

+12m 654 87.6

NOK 26-Jun 596.7 99.3+3m 605 99.1+6m 587 100.4

+12m 569 100.7

Equity markets

Regional

Price trend12 mth.

Regional recommen-dations

USA Defensive profile 5%-10% UnderweightEmerging markets (USD) Chinese recovery 15%-20% OverweightEurope (ex. Nordics) (EUR) EZ crisis but a strong North 10%-15% NeutralNordics Attractive cyclicals 15%-20% Overweight

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2013

NYMEX WTI 103 94 84 96 100 105 107 110 94 106ICE Brent 118 110 96 106 110 115 117 120 108 116Copper 8,329 7,800 7,600 7,800 8,000 8,200 8,400 8,600 7,882 8,300Zinc 2,042 1,940 1,850 1,950 2,000 2,100 2,200 2,250 1,946 2,138Nickel/1000 20 17 18 19 20 20 21 21 18 21Steel 522 460 450 470 480 485 490 500 476 489Aluminium 2,219 2,030 1,900 2,000 2,100 2,200 2,250 2,300 2,037 2,213Gold 1,691 1,605 1,600 1,600 1,610 1,620 1,650 1,670 1,624 1,638Matif Mill Wheat 210 210 215 215 220 220 220 220 212 220CBOT Wheat 643 635 690 684 718 735 735 735 663 730CBOT Corn 641 615 610 640 670 710 720 720 627 705CBOT Soybeans 1,272 1,280 1,410 1,420 1,430 1,440 1,450 1,460 1,346 1,445

Medium 5%-10%

1,482

723

1.91

2.652.65

3.393.303.65

2.342.35

1.90

2.60

0.881.151.401.70

3.95

2.002.20

1.75

1.001.201.25

2.032.202.40

20132012

1.851.78

2.052.45

1.752.002.20

79

16

7,3361,805

1,586220

92

4001,865

641

26-Jun

5%-10%5%-10%

MediumHigh

2.62

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Medium 5%-10%

Price trend3 mth.

0.56

0.84

0.34

0.96

0.06

0.72

0.850.900.90

0.55

80.3

120.1

743.3

80.082.084.0

120120120

880.1

748.4

740

870860850

750

125.4

----

100.9

743743745

0.350.350.35

124126130

101106112

0.83

0.100.150.25

1.791.85

0.600.70

1.051.101.15

3.20

1.90

0.650.700.750.35

1.601.90

2.29

7402.352.55

2.803.05

1.80

0.05

0.20

0.200.20

0.050.05

0.300.35

0.47

0.66

0.20

0.92

0.10

0.450.450.45

0.550.50

1.50

1.251.001.00

1.501.75

0.000.00

0.75

0.50

1.60

1.50

0.10

0.60

2.85

1.00

0.10

0.50

0.00

0.45

0.50

0.700.700.70

0.75

0.100.10

0.50

10-yr swap yield

2.13

0.100.100.10

3m interest rate

0.50

Average

Key int.rate

0.250.250.250.25

2.00

0.00

0.75


Nordic O

utlook

Nordic Outlook

Disclosure This research report has been prepared by Danske Research, a division of Danske Bank A/S ("Danske Bank").

Analyst certification

Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report.

Regulation

Danske Bank is authorized and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Services Authority (UK). Details on the extent of the regulation by the Financial Services Authority are available from Danske Bank upon request.

The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish Securities Dealers Association.

Conflicts of interest

Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high quality research based on research objectivity and independence. These procedures are documented in the research policies of Danske Bank. Employees within the Danske Bank Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to the Research Management and the Compliance Department. Danske Bank Research Departments are organised independently from and do not report to other business areas within Danske Bank.

Research analysts are remunerated in part based on the over-all profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions.

Financial models and/or methodology used in this research report

Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request.

Risk warning

Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text.

Expected updates

The Nordic Outlook is updated on a quarterly basis.

First date of publication

Please see the front page of this research report for the first date of publication.

Disclaimer General disclaimer

This research has been prepared by Danske Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ("Relevant Financial Instruments").

The research report has been prepared independently and solely on the basis of publicly available information which Danske Bank considers to be reliable. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness, and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report.

The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgment as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in the research report.

This research report is not intended for retail customers in the United Kingdom or the United States.

This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior written consent.

Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to "U.S. institutional investors" as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to “U.S. institutional investors”.

Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA, but satisfy the applicable requirements of a non-U.S. jurisdiction.

Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission.

N O R WAY

C h i e f E c o n o m i s tF r a n k J u l l u m+ 4 7 8 5 4 0 6 5 4 0f j u @ f o k u s . n o

F I N L A N D

C h i e f E c o n o m i s tP a s i P e t te r i K u o p p a m ä k i+ 3 5 8 ( 0 ) 1 0 5 4 6 7 7 1 5p a s i . k u o p p a m a k i @ d a n s k e b a n k . c o m

I N T E R N AT I O N A L M A C R O

C h i e f A n a l y s t & H e a d of A l l a n v o n M e h r e n + 4 5 4 5 1 2 8 0 5 5a l v o @ d a n s k e b a n k . d k

S i g n e P. R o e d - F r e d e r i k s e n + 4 5 4 5 1 2 8 2 2 9s r o e @ d a n s k e b a n k . d k

F r a n k Ø l a n d H a n s e n + 4 5 4 5 1 2 8 5 2 6 f r a n h @ d a n s k e b a n k . d k

A n d e r s M ø l l e r L u m h o l t z+ 4 5 4 5 1 2 8 4 9 8a n d j r g @ d a n s k e b a n k . d k

F l e m m i n g J e g b j æ r g N i e l s e n + 4 5 4 5 1 2 8 5 3 5f l e m m @ d a n s k e b a n k . d k

F I X E D I N C O M E R E S E A R C H

C h i e f A n a l y s t & H e a d of T h o m a s T h ø g e r s e n G r ø n k j æ r + 4 5 4 5 1 2 8 5 0 2th g r @ d a n s k e b a n k . d k

J e n s P e te r S ø r e n s e n+ 4 5 4 5 1 2 8 5 1 7 j e n s s r @ d a n s k e b a n k . d k

C h r i s t i n a E . Fa l c h + 4 5 4 5 1 2 7 1 5 2c h f a @ d a n s k e b a n k . d k

S ø r e n S ko v H a n s e n + 4 5 4 5 1 2 8 4 3 0s r h a @ d a n s k e b a n k . d k

S v e r r e H o l b e k + 4 5 4 5 1 4 8 8 8 2h o l b @ d a n s k e b a n k . d k

J a n We b e r Ø s te r g a a r d+ 4 5 4 5 1 3 0 7 8 9j a s t @ d a n s k e b a n k . d k

R AT E S , F X & C O M M O D I T I E S

S T R AT E G Y

C h i e f A n a l y s t & H e a d of A r n e L o h m a n n R a s m u s s e n + 4 5 4 5 1 2 8 5 3 2a r r @ d a n s k e b a n k . d k

K a s p e r K i r k e g a a r d + 4 5 4 5 1 3 7 0 1 8k a k i @ d a n s k e b a n k . d k

M o r te n T h r a n e H e l t+ 4 5 4 5 1 2 8 5 1 8m o h e l @ d a n s k e b a n k . d k

C h i e f A n a l y s tJ o h n H y d e s ko v + 4 4 2 0 7 4 1 0 8 1 4 4 j o h y @ d a n s k e b a n k . d k

C h r i s t i n K y r m e Tu x e n + 4 5 4 5 1 3 7 8 6 7tu x @ d a n s k e b a n k . d k

P e te r P o s s i n g A n d e r s e n + 4 5 4 5 1 3 7 0 1 9p a @ d a n s k e b a n k . d k

L a r s Tr a n b e r g R a s m u s s e n+ 4 5 4 5 1 2 8 5 3 4 l a r a s @ d a n s k e b a n k . d k

C R E D I T R E S E A R C H

C h i e f A n a l y s t & H e a d of T h o m a s M a r t i n H o v a r d+ 4 5 4 5 1 2 8 5 0 5 h o v a @ d a n s k e b a n k . d k

H e n r i k A r n t + 4 5 4 5 1 2 8 5 0 4h e a n d @ d a n s k e b a n k . d k

L o u i s L a n d e m a n+ 4 6 8 5 6 8 8 0 5 2 4l l a n @ d a n s k e b a n k . s e

J a ko b M a g n u s s e n + 4 5 4 5 1 2 8 5 0 3j a k j a @ d a n s k e b a n k . d k

A s b j ø r n P u r u p A n d e r s e n+ 4 5 4 5 1 4 8 8 8 6a p u @ d a n s k e b a n k . d k

D a n s k e B a n k , D a n s k e R e s e a r c h , H o l m e n s K a n a l 2 - 1 2 , D K - 1 0 9 2 C o p e n h a g e n K . P h o n e + 4 5 4 5 1 2 0 0 0 0 w w w. d a n s k e r e s e a r c h . c o m

D E N M A R K

C h i e f E c o n o m i s tS te e n B o c i a n+ 4 5 4 5 1 2 8 5 3 1s tb o @ d a n s k e b a n k . d k

L a s O l s e n + 4 5 4 5 1 2 8 5 3 6l a s o @ d a n s k e b a n k . d k

J e n s N æ r v i g P e d e r s e n + 4 5 4 5 1 2 8 0 6 1j e n p e @ d a n s k e b a n k . d k

S W E D E N

C h i e f A n a l y s t & H e a d of M i c h a e l B o s tr ö m+ 4 6 8 5 6 8 8 0 5 8 7m b o s @ c o n s e n s u s . s e

R o g e r J o s e f s s o n+ 4 6 8 5 6 8 8 0 5 5 8 r j o s @ c o n s e n s u s . s e

M i c h a e l G r a h n + 4 6 8 5 6 8 8 0 7 0 0m i k a @ c o n s e n s u s . s e

C a r l M i l to n+ 4 6 8 5 6 8 8 0 5 9 8c a r m i @ c o n s e n s u s . s e

M a r c u s S ö d e r b e r g+ 4 6 8 5 6 8 8 0 5 6 4m a r s d @ c o n s e n s u s . s e

S te f a n M e l l i n+ 4 6 8 5 6 8 8 0 5 9 2m e l l @ c o n s e n s u s . s e

GLOBAL DANSKE RESEARCH

H E A D O F G L O B A L D A N S K E R E S E A R C H T h o m a s T h ø g e r s e n G r ø n k j æ r + 4 5 4 5 1 2 8 5 0 2th g r @ d a n s k e b a n k . d k

C H I E F E C O N O M I S T AT D A N S K E B A N K

S te e n B o c i a n+ 4 5 4 5 1 2 8 5 3 1s tb o @ d a n s k e b a n k . d k

E M E R G I N G M A R K E T S

C h i e f A n a l y s t &H e a d of L a r s C h r i s te n s e n+ 4 5 4 5 1 2 8 5 3 0l a r c h @ d a n s k e b a n k . d k

S ta n i s l a v a P r a d o v a + 4 5 4 5 1 2 8 0 7 1s p r a @ d a n s k e b a n k . d k

Vi o l e ta K l y v i e n eS e n i o r B a l t i c A n a l y s t+ 3 7 0 6 1 1 2 4 3 5 4v k l y @ d a n s k e b a n k . d k

S e n i o r E c o n o m i s tS a n n a K u r r o n e n ( o n l e a v e )+ 3 5 8 1 0 5 4 6 7 5 7 3k u r r @ d a n s k e b a n k . c o m

E c o n o m i s tV l a d i m i r M i k l a s h e v s k y + 3 5 8 ( 0 ) 1 0 5 4 6 7 5 2 2v l m i @ d a n s k e b a n k . d k

Documents

Economic and financial trends