Økonomisk Perspektiv, september 2012 (DK)

■ Indhold

ØKONOMISK
PERSPEKTIV
SEPTEMBER 2012

I lavt gear

Dansk økonomi i vækstdvale
■ Lav vækst og stor usikkerhed præger dansk økonomi, som fort-
sat hænger fast i dødvandet. Økonomien vil dog gradvist finde til-
bage på vækstsporet trukket af forbrug og investeringer.

Skrøbeligt globalt opsving
■ Verdensøkonomien er fortsat i fremgang, men tempoet er lavt,
og vejen frem er mudret. Euroområdet er igen på vej ind i reces-
sion, mens USA og resten af verden hen over sommeren har op- OVERBLIK 04
levet en afmatning i den økonomiske aktivitet. Der er bedre tider I LAVT GEAR
forude, men usikkerheden er stor.
DANMARK 08
VÆKSTEN LADER VENTE PÅ SIG
USA 16
LANGSOMT FREMAD
EUROOMRÅDET 18
VÆKST KRÆVER TILLID
RUSLAND 24
INFLATIONS DEJA-VU
KINA 29
VARSOMME SKRIDT FREMAD
OLIE 33
HØJE PRISER SELVOM UDBUDDET STIGER
TO ALTERNATIVER 35
RISIKOSCENARIER
2 ØKONOMISK PERSPEKTIV │SEPTEMBER 2012 NORDEA MARKETS

■ Indhold

Dataoverblik OVERBLIK
I lavt gear ..................................................................................................... 4
Nøgletal ................................... 6
Renter og valuta ................... 7
Nordiske økonomier
DANMARK
Væksten lader vente på sig ........................................................................... 8

Redaktør SWEDEN
Households prop up the economy ................................................................ 10
Helge J. Pedersen,
Cheføkonom NORWAY
helge.pedersen@nordea.com Risk of overheating may be the biggest challenge ........................................ 12
Tel +45 3333 3126 FINLAND
Finnish economy has cooled down across the board .................................... 14

Redaktionel deadline Major economies
30 August 2012 USA
Moving slowly forward ................................................................................. 16
EURO AREA
Restore confidence to end the recession ...................................................... 18
Besøg os på: UK
www.nordeamarkets.com UK growth stalling – awaiting outside help ................................................... 20
JAPAN
The challenges remain in the long term ........................................................ 21

Kilder:
Kilde til data i grafer er Reuters Emerging Markets
EcoWin og nationale statisti-
kbureauer, med mindre andet er POLAND
angivet. Slowdown under control .............................................................................. 22
RUSSIA
Inflation déjà vu ........................................................................................... 24
ESTONIA
Economy remains in a soft patch ................................................................. 26
LATVIA
Economy keeps delivering positive surprises ............................................... 27
LITHUANIA
Showing resilience ...................................................................................... 28
CHINA
Stability, stability and … stability.................................................................. 29
INDIA
A drought of growth..................................................................................... 31
BRAZIL
Slow BRIC healing ....................................................................................... 32

Commodities
OIL
Oil prices stay high but spare capacity buffer should build ........................... 33
METALS
Metal prices scratching the bottom for now .................................................. 34

TWO ALTERNATIVES
Risk scenario 1: Back on track..................................................................... 35
Risk scenario 2: That sinking feeling............................................................ 36


■ Overblik

I lavt gear
Verdensøkonomien er fortsat i fremgang, men tempoet er ret i, at banker og kreditinstitutter har måttet skære ned
lavt, og vejen frem er mudret. Euroområdet er igen på for udlånsaktiviteten. Dette brud i den pengepolitiske
vej ind i recession, mens USA og resten af verden hen transmissionsmekanisme kan ECB få meget svært ved at
over sommeren har oplevet en afmatning i den økonomi- rette op på, selv hvis den europæiske bankunion som
ske aktivitet. Vi er dog af den opfattelse, at der er bedre ventet bliver en realitet fra 2013.
tider forude, men usikkerheden er stor. Pengepolitikken
vil være særdeles lempelig hen over prognoseperioden, Verden hænger jo sammen
hvor også opstramningen af finanspolitikken i euroom- Så længe den indenlandske efterspørgsel ligger underdre-
rådet løjer af. Men både den offentlige og private sektor jet – med store regionale forskelle mellem syd og nord –
vil fortsat være fokuseret på at reducere gælden, og kre- er euroområdet fortsat meget afhængig af eksporten som
ditvæksten vil være svag. Der er således udsigt til en mo- drivkraft for den økonomiske vækst. Problemet er, at kri-
derat vækst i verdensøkonomien på 3,1% i år. I 2013 og sen i euroområdet også har bredt sig til andre steder på
2014 vil væksten øges til hhv. 3,5% og 3,8%. kloden. Således har de økonomiske nøgletal i både USA
og Kina været ret svage hen over sommeren, og der er
Den europæiske statsgældskrise nåede at blusse op igen fortsat risiko for, at situationen kan forværres. Især synes
denne sommer, katalyseret af parlamentsvalg i Græken- risikoen at være stor i USA, hvor der er præsidentvalg til
land og bankkrise i Spanien. Men brandslukningen gik november, og hvor man står yderst på den såkaldte ’’fi-
hurtigt og prompte i gang. På topmødet i Bruxelles i slut- skale klippekant’’. De amerikanske politikere har bl.a.
ningen af juni besluttede de europæiske politikere at tage fortsat ikke taget stilling til, om en række skattepolitiske
yderligere institutionelle skridt mod dannelsen af en ægte lempelser tilbage fra Bush-administrationens tid skal vi-
økonomisk og monetær union, samtidig med at den nød- dereføres eller ej. Hvis de ikke bliver det, kan det i vær-
lidende spanske banksektor fik stillet EUR 100 mia. til ste fald betyde en så kraftig opstramning af finanspoli-
rådighed gennem den europæiske redningsfond tikken, at USA uvægerligt vil havne i en ny recession.
EFSF/ESM. I juli sænkede ECB renten endnu engang Samtidig skal kongressen igen træffe beslutning om at
med 0,25 procentpoint, og senest har ’Super Mario’ hæve gældsloftet for at forhindre en offentlig betalings-
Draghi verbalt udstukket garantier for, at euroområdet standsning i begyndelsen af det nye år. Det er ikke reali-
ikke går i opløsning. stisk, at der påbegyndes en løsning på disse problemstil-
linger før efter præsidentvalget, hvorfor de politiske risici
Det er endnu uklart, præcist hvordan ECB vil garantere for den fortsatte fremgang i USA ikke må undervurderes.
dette, men alt tyder på, at det bliver i form af et storstilet
interventionsprogram i statsobligationsmarkedet. Det vil Vort hovedscenario er dog baseret på, at gældsloftet atter
dog blive gjort betinget af, at det land, hvis obligationer hæves, og at i hvert fald en del af skattelettelserne videre-
ECB skal købe, har anmodet EFSF/ESM om støtte og i føres under den nye præsident, uanset om han hedder Ba-
den forbindelse indgår et dertil hørende økonomisk stabi- rack Obama eller Mitt Romney. Endelig må det ikke
liseringsprogram. Det sidste vil det gøre det nemmere for glemmes, at forbundsbanken under Ben Bernanke i langt
Bundesbank og de tyske politikere at sluge (endnu) en videre udstrækning end i euroområdet er indstillet på at
økonomisk politisk kamel. Tyskland er fortsat bekymret understøtte den økonomiske vækst. De pengepolitiske
for, at redningsplanerne kan føre til mere økonomisk styringsrenter vil derfor være rekordlave frem til 2014,
slendrian blandt de gældsplagede landes politikere og og døren for yderligere kvantitative lempelser står fortsat
langsigtede inflationære risici. De store gældsramte lande åben, hvis konjunktursituationen forværres yderligere.
Spanien og Italien er topkandidater til at benytte sig af
den nye facilitet, hvis renten igen stiger til et ikke- Kina lemper den økonomiske politik
holdbart niveau, men programmet er principielt åbent for Den politiske situation er mere forudsigelig i Kina, selv-
alle lande. om ’Riget i Midten’ også skal finde en ny politisk ledelse
i år. Men når det kommer til handling for at genskabe
Tillid er afgørende vækst, virker ét-parti systemet uovertruffent. I en perio-
ECB’s proaktivitet – som også vil resultere i en yderlige- de, hvor eksportvæksten er ramt af den internationale
re rentesænkning – er et vigtigt skridt i retning af at få afmatning, lempes den økonomiske politik med stor
genskabt de finansielle markeders tillid til eurozonen. sandsynlighed så rigeligt, at den økonomiske vækst vil
Det kan i sidste instans vise sig afgørende for også at få kunne holde sig omkring det niveau på 8%, der er nød-
væksten tilbage i den private sektor. For selvom renten er vendig for at undgå en stigning i arbejdsløsheden.
rekordlav, er forbrugs- og investeringslysten fortsat på
nulpunktet. Det skyldes utvivlsomt en kombination af Vækstudsigterne synes også fortsat at være relativt fine i
manglende tillid til fremtiden blandt husholdninger og Brasilien og Rusland, hjulpet af de høje råvarepriser og
virksomheder, der afspejler sig i en svag låneefterspørg- nye reforminitiativer. Mere problematisk ser situationen
sel, og den nye regulering af den finansielle sektor. De ud i Indien, hvor eksporten er ramt af den internationale
skærpede solvens- og likviditetskrav har således resulte- afmatning, hvor en svag monsoon har medført krise i


■ Overblik

landbruget, og et stort offentligt budgetunderskud redu- den efteråret 2010 har holdt aktiviteten fastlåst på et stort
cerer mulighederne for at afhjælpe situationen gennem set uændret niveau. Økonomien vil over de kommende
øget offentlig efterspørgsel. kvartaler gradvist finde tilbage på vækstsporet trukket af
et stort uforløst potentiale i husholdningerne, som grad-
Højere priser, men ingen løn-pris-spiral i sigte vist vil blive vekslet til et stigende forbrug. Samtidig un-
Vejrligets luner har også ramt USA, hvor den værste tør- derstøttes væksten af en forsinket effekt fra den offentli-
ke i mands minde har afstedkommet rekordhøje priser på ge sektor, hvor både forbruget og investeringerne ventes
bl.a. majs og soyabønner. De stigende fødevarepriser – at bidrage positivt.
og nu igen stigende oliepriser – vil give anledning til sti-
gende forbrugerpriser ikke alene i USA, men også i re- Høj sol over Norge
sten af verden. Alligevel er der på nuværende tidspunkt Der er til gengæld kun få svaghedstegn at spore i den
ikke grund til den store bekymring for inflationen inden norske økonomi, som fortsat nyder godt af de høje olie-
for prognoseperioden. Dertil er den økonomiske situation priser. Væksten vil også være stærk fremover, men tak-
fortsat for svag i de industrialiserede lande, hvor der er ket være en stor indvandring af arbejdskraft kan det med
mange ledige ressourcer. Derfor er der kun en meget lille stor sandsynlighed undgås, at arbejdsmarkedet overop-
risiko for, at de stigende forbrugerpriser sætter gang i en hedes, og omkostningspresset stiger markant. Lønvæk-
inflationær løn-pris-spiral, ligesom virksomhedernes mu- sten bliver godt nok markant højere end i de øvrige nor-
lighed for at øge avancerne fortsat begrænses af den glo- diske lande, men ikke så høj, at Norges Banks inflati-
bale konkurrence og fortsatte krise. onsmål bliver truet. Den stærke økonomiske vækst og en
noget højere kapacitetsudnyttelse tilsiger ikke desto min-
Pengepolitikken er lempelig længe endnu dre, at renten kommer til at stige noget over de kommen-
Det betyder også, at de ledende markedsrenter kun vil de år. Dilemmaet for Norges Bank er imidlertid, at den
stige svagt frem til 2014, hvor ECB og Fed vil begynde norske krone derved risikerer at blive styrket for meget.
at stramme rentepolitikken igen. Vi venter, at ECB vil
hæve renten til 1% mod slutningen af 2014, hvor Fed til Også den svenske økonomi har indtil videre været en sol-
gengæld vil have sat renten op til 2%. Den enorme likvi- strålehistorie. Således steg både BNP og beskæftigelsen i
ditetsudpumpning, som de store centralbanker har stået første halvår 2012 til trods for afmatningen i den interna-
bag over de senere år, udgør fortsat en latent inflationsfa- tionale økonomi. Meget tyder dog på, at væksten aftager
re, hvis ikke den trækkes tilbage, i takt med at de kom- over de kommende kvartaler, men husholdningerne er
mercielle bankers udlånsvillighed atter tager til. Det vil i fortsat i god form, hvilket i kombination med en lidt me-
givet fald kunne føre til højere renter end forudset i re ekspansiv økonomisk politik og den ventede bedring
prognosen. af de internationale konjunkturer vil understøtte væksten
hen over prognoseperioden. Afmatningen i resten af
Pengepolitikken har stor betydning for udviklingen i va- 2012 vil dog sætte sine spor på arbejdsmarkedet. Ledig-
lutakurserne. Derfor vurderer vi også, at USD vil stige heden vil således stige i løbet af vinteren, hvilket vil bi-
over for EUR i løbet af prognosehorisonten, selvom an- drage til at reducere det indenlandske omkostningspres. I
dre forhold som betalingsbalance og gældssituation kan kombination med en fortsat styrkelse af SEK vil inflatio-
dukke op som temaer på markedet. Den historiske bin- nen derfor kunne holdes betragteligt under målsætningen
ding mellem USD og GBP betyder, at også GBP styrkes i på 2%. Riksbanken vil på den baggrund kunne sænke
hovedscenariet over for EUR. Sent i prognoseperioden den pengepolitiske styringsrente yderligere i år. Mod
venter vi, at CHF svækkes over for EUR, mens JPY slutningen af 2013, når økonomien atter tager til i styrke,
svækkes over for USD, i takt med at forholdene på de fi- vil banken påbegynde en ny stramningscyklus.
naniselle markeder gradvist normaliseres.
Finland mærker ligeledes afmatningen i verdensøkono-
Også sikre havne kan rammes mien og er formentlig på vej i recession. Eksporten og
Danmark, Finland, Norge og Sverige tilhører alle den lil- investeringsaktiviteten falder i tråd med udviklingen i
le eksklusive gruppe af lande, som har en toprating hos verdenshandlen, mens en svagere import afspejler pro-
de store kreditvurderingsinstitutter. Det har givet status blemer i den indenlandske efterspørgsel. Det private for-
som sikre havne på de finansielle markeder. Konsekven- brug har efterhånden ikke mange drivkræfter tilbage, og
sen har været markant stigende valutakurser for Norge og dampen vil gå yderligere af, når afmatningen også ram-
Sveriges vedkommende, mens Danmark, som fører fast- mer arbejdsmarkedet. Et nyt opsving drevet af bedre in-
kurspolitik over for euroområdet, har oplevet rekordlave ternationale konjunkturer vil først komme senere i prog-
renter. Faktisk har den danske nationalbank måtte indføre noseperioden. På den baggrund har vi nedjusteret
negative renter på indskudsbeviser for at reducere kapi- vækstskønnet for 2013, som dog fortsat er markant høje-
taltilstrømningen, der også har resulteret i en rekordstor re end gennemsnittet for euroområdet.
valutareserve.
Cheføkonom Helge J. Pedersen
Alligevel præger lav vækst og stor usikkerhed dansk helge.pedersen@nordea.com +45 3333 3126
økonomi, som fortsat hænger fast i det dødvande, der si-


■ Overblik

Realvækst, % Inflation, %
2010 2011 2012E 2013E 2014E 2010 2011 2012E 2013E 2014E
Verden1) 4.6 3.8 3.1 3.5 3.8 Verden1) 2.8 4.1 2.9 2.9 2.9

USA 2.4 1.8 2.2 2.0 2.2 USA 1.6 3.1 2.1 2.2 2.2
Euroområdet 1.9 1.5 -0.4 0.6 1.7 Euroområdet 1.6 2.7 2.2 1.6 1.6
Kina 9.2 10.5 8.0 8.3 8.5 Kina 3.3 5.4 3.1 4.0 3.8
Japan 4.6 -0.7 2.5 1.6 1.1 Japan -0.7 -0.3 0.2 -0.1 -0.1

Danmark 1.3 0.8 0.7 1.9 2.1 Danmark 2.3 2.8 2.4 2.0 2.2
Norge 1.9 2.4 3.7 3.0 2.8 Norge 2.5 1.2 0.8 1.8 2.1
Sverige 6.2 3.9 1.2 1.8 2.3 Sverige 1.2 3.0 1.2 1.2 2.0

UK 1.8 0.8 -0.4 1.0 1.7 UK 3.3 4.5 3.0 2.2 1.4
Schw eiz 2.7 2.1 1.5 1.9 2.4 Schw eiz 0.7 0.2 -0.7 0.6 1.6

Tyskland 4.0 3.1 0.9 1.4 2.1 Tyskland 0.2 1.2 1.9 1.7 2.1
Frankrig 1.6 1.7 0.1 0.8 1.7 Frankrig 0.1 1.7 2.1 1.8 1.9
Italien 1.8 0.5 -2.3 -0.5 1.0 Italien 1.6 2.9 3.1 2.1 1.5
Spanien -0.3 0.4 -1.2 -0.9 1.1 Spanien 2.0 3.1 2.4 2.2 0.5
Holland 1.6 1.1 -0.2 1.2 1.7 Holland 0.9 2.5 2.4 1.7 1.8
Østrig 2.3 2.7 0.9 0.8 1.7 Østrig 1.7 3.6 2.2 1.8 1.9
Belgien 2.4 1.8 -0.4 0.6 1.8 Belgien 2.3 3.5 2.2 1.5 1.7
Portugal 1.4 -1.6 -2.7 0.0 1.2 Portugal 1.4 3.6 2.9 1.5 1.3
Grækenland -3.5 -6.9 -6.6 -0.9 1.2 Grækenland 4.7 3.1 0.5 -0.5 0.0
Finland 3.3 2.7 0.8 1.2 2.8 Finland 1.2 3.4 3.0 2.5 2.3
Irland -0.8 1.4 -0.2 1.5 2.1 Irland -1.6 1.2 1.8 1.5 1.5
Estland 2.3 7.6 2.3 3.5 3.8 Estland 3.0 5.0 3.7 3.0 2.9

Polen 3.9 4.3 2.8 2.3 3.1 Polen 2.6 4.3 3.9 2.7 2.2
Rusland 4.0 4.4 4.2 4.8 5.0 Rusland 6.9 8.5 6.3 6.8 7.0
Letland -0.3 5.5 4.2 2.5 3.9 Letland -1.1 4.4 2.3 2.5 2.8
Litauen 1.4 5.9 2.7 3.3 3.5 Litauen 1.3 4.1 3.0 2.8 3.0
Indien 9.6 6.9 6.0 6.7 7.2 Indien 9.6 9.5 7.5 6.8 7.0
Brasilien 7.6 2.8 2.6 4.6 4.8 Brasilien 5.0 6.4 5.2 5.4 5.8

Offentlige finanser, % af BNP Betalingsbalance, % af BNP
2010 2011 2012E 2013E 2014E 2010 2011 2012E 2013E 2014E
USA -8.9 -8.6 -7.0 -5.5 -4.1 USA -3.0 -3.1 -3.0 -3.5 -3.0
Euroområdet -6.2 -4.1 -3.7 -3.0 -2.5 Euroområdet 0.0 0.0 0.3 0.7 1.0
Kina -1.7 -1.1 -1.5 -2.3 -1.9 Kina 5.1 2.8 2.5 2.2 1.5
Japan -9.0 -9.7 -9.9 -9.6 -9.0 Japan 3.6 2.0 2.1 2.5 2.4

Danmark -2.7 -1.9 -3.9 -2.1 -0.5 Danmark 5.5 6.7 5.8 5.1 4.4
Norge 11.3 13.8 13.7 13.9 13.6 Norge 12.4 14.5 14.9 15.4 15.1
Sverige -0.1 0.1 -0.3 -1.0 -0.5 Sverige 6.8 7.0 7.2 7.6 7.5

UK -10.4 -8.3 -7.6 -6.4 -4.7 UK -2.5 -1.9 -2.3 -2.1 -1.3
Schw eiz 0.7 0.8 0.1 0.1 0.2 Schw eiz 14.3 10.4 9.3 8.7 9.9

Tyskland -4.3 -1.0 -0.8 -0.6 -0.5 Tyskland 5.8 5.3 4.6 4.4 4.0
Frankrig -7.1 -5.2 -4.7 -3.9 -3.5 Frankrig -2.2 -2.7 -2.4 -2.1 -2.0
Italien -4.6 -3.9 -2.0 -1.8 -1.0 Italien -3.5 -3.1 -2.0 -1.0 -0.5
Finland -2.5 -0.6 -0.5 -0.1 0.5 Finland 1.6 -1.1 -0.2 0.2 0.6
Estland 0.2 1.0 -1.5 -0.5 -0.3 Estland 3.8 2.1 -2.3 -1.5 -1.3

Polen -7.8 -5.1 -3.3 -3.3 -2.9 Polen -4.7 -4.3 -3.6 -3.0 -3.0
Rusland -4.0 0.5 0.2 0.5 0.7 Rusland 4.8 4.5 4.2 3.0 2.5
Letland -8.2 -3.5 -2.2 -2.0 -2.0 Letland 3.0 -1.2 -3.2 -3.5 -3.6
Litauen -7.2 -5.5 -2.7 -3.0 -3.0 Litauen 1.1 -1.6 -2.7 -3.0 -3.0
Indien -3.6 -6.6 -7.0 -7.5 -8.0 Indien -3.3 -2.8 -4.0 -3.0 -2.2
Brasilien -2.7 -2.4 -2.0 -2.1 -2.2 Brasilien -2.3 -2.1 -2.5 -2.7 -2.8
1) Vægt et gennemsnit af lande i t abellen, om udgør 70,7 %af verdens BNP. Vægt e er beregnet ud f ra købekraf t skorrigeret BNP-niveauer for 2010 i henhold til IM F’s World Economic Out look database


■ Overblik

Pengepolitiske styringsrenter Pengepolitisk rentespænd til euroområdet
30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14
USA 0.25 0.25 0.25 0.25 2.00 USA -0.50 -0.25 -0.25 -0.25 1.00
Japan 0.10 0.10 0.10 0.10 0.10 Japan1) -0.15 -0.15 -0.15 -0.15 -1.90
Euroområdet 0.75 0.50 0.50 0.50 1.00 Euroområdet - - - - -
Danmark 0.20 0.05 0.15 0.25 1.00 Danmark -0.55 -0.45 -0.35 -0.25 0.00
Sverige 1.50 1.25 1.00 1.50 2.00 Sverige 0.75 0.75 0.50 1.00 1.00
Norge 1.50 1.50 1.75 2.00 2.75 Norge 0.75 1.00 1.25 1.50 1.75
UK 0.50 0.50 0.50 0.50 1.00 UK -0.25 0.00 0.00 0.00 0.00
Schw eiz 0.00 0.00 0.00 0.50 1.00 Schw eiz -0.75 -0.50 -0.50 0.00 0.00
Polen 4.75 4.50 4.00 4.00 4.50 Polen 4.00 4.00 3.50 3.50 3.50
Rusland 8.00 8.00 8.25 8.25 8.25 Rusland 7.25 7.50 7.75 7.75 7.25
Kina 6.00 5.75 5.75 6.00 6.00 Kina 5.25 5.25 5.25 5.50 5.00
Indien 8.00 8.00 7.75 7.75 7.50 Indien 7.25 7.50 7.25 7.25 6.50
Brasilien 7.50 7.50 7.50 8.00 10.50 Brasilien 6.75 7.00 7.00 7.50 9.50
1) Spænd til USA

3 mdr. renter 3 mdr. rentespænd til euroområdet
30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14
USA 0.42 0.45 0.50 0.60 2.50 USA 0.13 0.20 0.25 0.10 1.30
Danmark 0.31 0.35 0.40 0.70 1.45 Danmark 0.03 0.10 0.15 0.20 0.25
Sverige 1.95 1.55 1.50 2.00 2.50 Sverige 1.66 1.30 1.25 1.50 1.30
Norge 2.05 2.02 2.27 2.43 3.16 Norge 1.76 1.77 2.02 1.93 1.96
UK 0.68 0.60 0.60 0.60 1.25 UK 0.40 0.35 0.35 0.10 0.05
Polen 5.04 4.85 4.35 4.30 4.80 Polen 4.75 4.60 4.10 3.80 3.60
Rusland 7.17 7.40 7.50 7.50 8.00 Rusland 6.88 7.15 7.25 7.00 6.80
Letland 0.61 0.55 0.50 0.50 1.20 Letland 0.32 0.30 0.25 0.00 0.00
Litauen 0.89 0.75 0.80 1.10 1.70 Litauen 0.60 0.50 0.55 0.60 0.50

10-årige benchmark statsobligationsrenter 10-årigt rentespænd til euroområdet
30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14
USA 1.64 2.00 2.50 3.00 4.00 USA 0.30 0.25 0.60 0.80 1.35

Danmark 1.08 1.55 1.75 2.05 2.55 Danmark -0.26 -0.20 -0.15 -0.15 -0.10
Sverige 1.38 1.80 2.00 2.60 3.00 Sverige 0.04 0.05 0.10 0.40 0.35
Norge 1.97 2.58 2.86 2.96 3.14 Norge 0.62 0.83 0.96 0.76 0.49

UK 1.48 1.75 2.00 2.25 2.75 UK 0.14 0.00 0.10 0.05 0.10

Polen 4.92 4.80 4.90 5.00 5.50 Polen 3.58 3.05 3.00 2.80 2.85

Valutakurser mod DKK Valutakurser mod EUR og USD
30.8.12 3M 30.6.13 31.12.13 31.12.14 30.8.12 3M 30.6.13 31.12.13 31.12.14
EUR/DKK 7.45 7.45 7.46 7.46 7.46 EUR/USD 1.26 1.30 1.20 1.15 1.10
USD/DKK 5.93 5.73 6.21 6.48 6.78 EUR/JPY 1) 99 104 98 98 99
JPY/DKK1) 7.54 7.16 7.58 7.63 7.53 EUR/GBP 0.79 0.81 0.78 0.77 0.75
SEK/DKK 0.89 0.89 0.88 0.87 0.87 EUR/CHF 1.20 1.20 1.20 1.25 1.30
NOK/DKK 1.02 0.99 0.99 1.01 0.99 EUR/SEK 8.36 8.35 8.50 8.60 8.60
GBP/DKK 9.39 9.23 9.62 9.75 9.94 EUR/NOK 7.31 7.50 7.50 7.40 7.50
CHF/DKK 6.20 6.21 6.21 5.96 5.73 EUR/PLN 4.19 4.00 3.92 3.80 3.70
PLN/DKK 1.78 1.86 1.90 1.96 2.01 USD/JPY 78.6 80.0 82.0 85.0 90.0
RUB/DKK 0.18 0.18 0.21 0.23 0.23 USD/GBP 1.58 1.61 1.55 1.50 1.47
LVL/DKK 10.7 10.6 10.7 10.6 10.6 USD/CHF 0.96 0.92 1.00 1.09 1.18
LTL/DKK 2.16 2.16 2.16 2.16 2.16 USD/SEK 6.66 6.42 7.08 7.48 7.82
CNY/DKK 0.93 0.90 0.98 1.04 1.11 USD/NOK 5.81 5.77 6.25 6.43 6.82
INR/DKK 0.11 0.10 0.12 0.14 0.15 USD/PLN 3.33 3.08 3.27 3.30 3.36
BRL/DKK 2.89 2.94 3.36 3.70 3.99 USD/CNY 6.35 6.36 6.34 6.25 6.10
1) Pr. 100 enheder USD/INR 55.6 55.0 53.0 48.0 45.0
USD/BRL 2.05 1.95 1.85 1.75 1.70


■ Danmark

Væksten lader vente på sig
• Stigende aktivitet frem mod 2014 Trods udsigt til en historisk høj opsparingskvote har vi i
prognosen antaget, at det private forbrug gradvist vil
• Bedre takter på boligmarkedet vokse frem mod udgangen af 2014. Den accelererende
• Forsinket effekt fra offentlig pengestrøm vækst i privatforbruget vil dels blive trukket af et opspa-
ret forbrugsbehov, dels blive hjulpet på vej af en generelt
• Negative renter fra Nationalbanken virker bedre stemning omkring dansk økonomi. Ikke mindst ud-
sigterne til stigende beskæftigelse og en forbedret situati-
Lav vækst og stor usikkerhed præger dansk økonomi, on på boligmarkedet vil øge forbrugslysten i de danske
som fortsat hænger fast i det dødvande, der siden efter- husholdninger henover prognoseperioden.
året 2010 har holdt aktiviteten fastlåst på et stort set
uændret niveau. Vi forventer, dog, at økonomien over Boligmarkedet viser tegn på heling
de kommende kvartaler gradvist vil finde tilbage på Det blødende boligmarked har siden midten af 2008
vækstsporet og vokse med 0,7% i indeværende år, sti- hængt som en tung blyklods om halsen på dansk økono-
gende til 1,9% i 2013 og 2,1% i 2014. mi. Faldet i boligformuen, mindre kreditvækst og histo-
risk lav aktivitet inden for byggeriet har således været en
Den ventede vending i konjunkturerne vil på den inden- af hovedårsagerne til det stagnerende privatforbrug. Med
landske front blive trukket af et stort uforløst potentiale i de seneste revisioner af månedstallene fra Danmarks Sta-
husholdningerne, som gradvist vil blive vekslet til et sti- tistiks Ejendomsprisstatistik tyder meget dog på, at bo-
gende forbrug. Samtidig understøttes væksten af en for- ligpriserne siden årets start har stabiliseret sig. Vi forven-
sinket effekt fra den offentlige sektor, hvor både forbru- ter, at denne udvikling markerer startskuddet på et nyt
get og investeringerne ventes at bidrage positivt. regime på det danske boligmarked, hvor de historisk lave
finansieringsomkostninger og et stort opsparet efter-
Forbrugerne holder på pengene spørgselsbehov efterhånden konsoliderer markedet.
Selv om udbetalingerne fra de opsparede efterlønspenge
nærmer sig DKK 20 mia. (og dermed allerede nu oversti- Priserne vil dog blive holdt i ave af et fortsat stort lager
ger de officielle forventninger), er effekten på detailsal- af usolgte boliger, en lav omsætning og en høj ungdoms-
get og privatforbruget indtil videre udeblevet. I stedet har arbejdsløshed, som reducerer antallet af førstegangskøbe-
mange valgt at øge opsparingen, og husholdningernes re. Fanget mellem disse to modsatrettede kræfter venter
samlede indestående i pengeinstitutterne er steget til det vi, at boligpriserne i resten af året vil ligge stort set ufor-
højeste niveau nogensinde. For dansk økonomi betyder andret. Ind i det nye år venter vi, at huspriserne langsomt
det, at aktiviteten lider under manglen på den vitaminind- vil kravle opad, så de ind i 2014 igen overstiger den for-
sprøjtning, som normalt strømmer fra det private forbrug. ventede inflation. De moderat stigende boligpriser vil
Samtidig amputerer det regeringens muligheder for at først og fremmest blive koncentreret omkring de store
stimulere den økonomiske aktivitet gennem skatte- og byer, hvor den demografiske udvikling tilsiger et opad-
afgiftspolitikken. gående pres på efterspørgslen.

Danmark: makroøkonomiske nøgletal (realvækst i pct. med mindre andet er angivet)
2009 (DKKbn) 2010 2011 2012E 2013E 2014E
Privatforbrug 815 1.9 -0.8 0.6 1.8 1.9
Offentligt forbrug 497 0.3 -1.3 0.4 0.8 0.8
Faste bruttoinvesteringer i alt 314 -3.7 0.2 2.8 4.0 4.7
- offentlige investeringer 33 8.5 5.2 8.5 -12.0 2.5
- boliginvesteringer 80 -7.4 8.8 -5.8 4.7 5.0
- faste erhvervsinvesteringer 201 -4.4 -3.8 5.0 7.1 4.9
Lagerinvesteringer* -20 1.0 0.3 0.1 0.0 0.0
Eksport 794 3.2 7.0 2.0 2.9 3.5
Import 731 3.5 5.2 2.6 3.6 3.6
BNP 1.3 0.8 0.7 1.9 2.1
BNP nominel (mia. DKK) 1,668 1,772 1,783 1,818 1,879 1,949

Bruttoarbejdsløshed, % 6.3 6.2 6.3 6.4 6.2
Bruttoarbejdsløshed, 1000 personer 164.5 162.1 165.0 168.7 163.2
Forbrugerpriser, % årsvækst 2.3 2.8 2.4 2.0 2.2
Lønninger i den privat sektor, % årsvækst 2.3 1.8 1.8 1.9 2.1
Nominelle huspriser, enfamilie, % y/y 2.8 -2.8 -4.3 1.2 1.9
Betalingsbalance (mia. DKK) 96.9 119.1 105.0 95.0 85.0
- % af BNP 5.5 6.7 5.8 5.1 4.4
Offentlig budgetsaldo (mia. DKK) -47.4 -34.5 -71.0 -40.0 -10.0
- % af BNP -2.7 -1.9 -3.9 -2.1 -0.5
Offentlig gæld, % af BNP 42.9 46.6 45.5 44.5 43.0
* Contribution to GDP growth (% points)


■ Danmark

Negative nationalbankrenter er en succes Forbruget er stagneret
Nationalbanken har under gældskrisen været tvunget til
at føre en meget proaktiv pengepolitik for at holde den
danske krone stabil over for euroen. Som et vitalt led i
dette forsvar nedsatte Nationalbanken i starten af juli ren-
ten på indskudsbeviser til -0,20%. Det er første gang i
Danmarkshistorien, at Nationalbanken opererer med ne-
gative renter på indskud. Operationen har indtil videre
haft den ønskede effekt. Den danske krone er stabiliseret
på et solidt niveau over for euroen, uden at Nationalban-
ken har haft behov for at gribe ind på markedet. Det står i
skarp kontrast til situationen i maj og juni, hvor der i alt
blev solgt danske kroner for mere end DKK 36 mia. som
led i forsvaret af den danske fastkurspolitik.
Nationalbankens indlånsrente er negativ
Offentlig pengestrøm sander til
I et forsøg på at løfte økonomien ud af det aktuelle død-
vande har regeringen besluttet at fremrykke offentlige
investeringer for i alt DKK 19 mia. Samtidig er det of-
fentlige forbrug budgetteret til at vokse med DKK 18
mia. i år og yderligere knap DKK 8 mia. i 2013 – sva-
rende til en real vækst på henholdsvis 1,5% og 0,1%.
Trods disse intentioner var der i 1. halvår et fald i det of-
fentlige forbrug på 1,0%, mens de offentlige investerin-
ger ”kun” steg med 3%. Dermed har dansk økonomi ind-
til videre ikke fået det bidrag fra finanspolitikken, som
oprindeligt var planlagt. Forklaringen på den træge ud-
vikling skal dels findes i en lang implementeringsperiode Forbedret konkurrenceevne
for de offentlige investeringer, dels at forbruget i den of-
fentlige sektor historisk set har vist sig særdeles vanske-
ligt at finjustere. Udviklingen betyder, at der er udsigt til
en betydelig ketchupeffekt over de kommende kvartaler,
som vil kunne yde et væsentligt bidrag til at trække
dansk økonomi fri af det aktuelle dødvande, hvis rege-
ringen formår at leve op til sine egne planer.

Forbedret konkurrenceevne trækker eksporten frem
Efter et midlertidigt dyk i årets start er eksporten igen på
fremmarch. Denne udvikling er dels drevet af en fortsat
vækst på de vigtigste eksportmarkeder, dels af en forbed-
ret konkurrenceevne. Det er først og fremmest sket gen-
nem en svækkelse af den handelsvægtede kronekurs, som
har gjort danske varer forholdsmæssigt billigere på de Dekobling mellem beskæftigelse og boligpriser
udenlandske markeder.

Men også det seneste års markante fald i lønstigningstak-
ten i kombination med en forbedring i produktiviteten
betyder, at enhedslønomkostningerne i Danmark nu sti-
ger langsommere end hos de vigtigste samhandelspartne-
re. Og selvom effekten af de lavere enhedslønomkostnin-
ger primært slår igennem på lidt længere sigt, er det en
helt afgørende forudsætning for at kunne fastholde en
fortsat og nødvendig fremgang i eksporten.

Helge J. Pedersen
helge.pedersen@nordea.com +45 33333126

Jan Størup Nielsen
Jan.storup.nielsen@nordea.com +45 33333171


■ Sweden

Households prop up the economy
• GDP growth edging higher in coming years … Households keep the wheels turning
Household finances are generally stable. A low inflation
• … but near term, the labour market will weaken level and pay rises jack up households’ purchasing pow-
• Long period of low inflation er. Real disposable incomes will rise by about 2% annu-
ally in 2012-2014. The improved household finances
• Riksbank to cut rates this year, and the SEK weakens have fed through to the housing market. House prices
have started to rise again after having shown a slightly
Good growth weak trend over the past year. Share prices are also im-
The Swedish economy has been surprisingly resilient to portant for households’ propensity to spend, and since
the global turbulence. GDP growth did drop towards the the turn of the year stock markets have recovered some-
end of 2011, but both the GDP and employment rose what. The conditions for households are therefore benign
again during H1 2012. The domestic economy was the so we expect consumer spending to rise noticeably in
key driver of growth, but also foreign trade improved. coming years.
Growth in H1 2012 was fairly high, we think, despite the
possibility of a downward revision to Q2 GDP growth. Investment activity lost pace in Q2 2012 after rising
sharply at the beginning of the year. There are indications
Although the economy has been able to tackle the global that capacity utilisation in several sectors has declined,
obstacles better than expected, GDP growth is still not which reduces the need for new investment. In addition,
sufficiently high to prevent a decline in the demand for investment appetite seems suppressed by the dark clouds
labour. We expect unemployment to rise above 8% dur- still hanging over Europe. The number of housing starts
ing the winter. has already dropped sharply, and total investment will
show a weak trend in coming quarters. We expect the
Prospects for H2 2012 are mixed. We will likely see sub- general need for investments to be modest during most of
dued growth. However, longer out there are factors sug- next year and then increase in 2014 in tandem with the
gesting a pick-up in activity. A benign situation for overall pick-up in activity. An expansionary fiscal policy
households, a slightly more expansionary economic poli- partly based on infrastructure investment will contribute
cy and a global economy that gradually recovers are the to underpinning investment growth over the forecast
factors that will underpin higher GDP growth in coming horizon.
years. However, due to global weakness growth will only
accelerate slowly and unemployment will not decline un- Tough times for the export industry
til the latter part of the forecast period Despite some improvement recently, exports of goods
have stagnated over the past year. The order intake re-

Sweden: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (SEKbn) 2010 2011 2012E 2013E 2014E
Private consumption 1,533 3.7 2.0 1.7 2.0 2.1
Government consumption 860 1.9 1.8 0.8 0.5 1.5
Fixed investment 559 7.7 6.2 2.5 1.0 3.5
- industry 74 1.0 7.9 -2.2 2.2 4.4
- residential investment 92 17.2 15.1 -8.7 -2.2 4.5
Stockbuilding* -46 2.1 0.6 -1.1 0.1 0.0
Exports 1,489 11.7 6.9 1.2 4.2 4.9
Imports 1,288 12.7 6.3 -0.4 3.8 5.1
GDP 6.2 3.9 1.2 1.8 2.3
GDP, calendar adjusted 5.9 3.9 1.5 1.8 2.4
Nominal GDP (SEKbn) 3,106 3,331 3,492 3,580 3,703 3,836

Unemployment rate, % 8.4 7.5 7.7 8.0 7.7
Employment grow th 1.0 2.1 0.3 -0.2 0.8
Consumer prices, % y/y 1.2 3.0 1.2 1.2 2.0
Underlying inflation (CPIF), % y/y 2.0 1.4 1.1 1.5 1.5
Hourly earnings, % y/y 0.4 2.9 3.3 3.2 2.8
Current account (SEKbn) 225 243 259 280 288
- % of GDP 6.8 7.0 7.2 7.6 7.5
Trade balance, % of GDP 2.6 2.7 2.9 3.0 2.7

General govt budget balance (SEKbn) -2 5 -12 -38 -18
- % of GDP -0.1 0.1 -0.3 -1.0 -0.5
Gross public debt, % of GDP 39.4 38.4 38.1 39.1 39.6


■ Sweden

mains weak, and growth in many key export markets is Rising incomes and consumption
low. Accordingly, goods exports will likely remain sub-
dued during the remainder of 2012. Also the strong SEK
is a problem for exporters. However, it probably affects
profitability rather than volumes. The situation will im-
prove longer out as the SEK will likely weaken and de-
mand gradually rise.

Sweden’s trade in services, which has increased sharply
so far this year, is gaining significance. Exports of ser-
vices have risen from 6% of GDP in 1980 to currently
15% of GDP. The export markets for services are largely
identical to those for goods – where demand is weak.
This suggests that the pick-up in H1 was temporary and
will lose momentum going forward.
Weak global demand a drag on Swedish exports
Low inflation puts pressure on the Riksbank
Despite an increase in the number of employed this year
the labour market still shows signs of weakness. The de-
mand for labour has not been sufficiently strong to keep
unemployment in check. Labour market indicators are
still at benign levels, but have started to soften. We look
for a decline in employment and accelerating growth in
unemployment during autumn and winter.

Labour market weakness is usually accompanied by re-
duced domestic inflation. Also, the SEK strengthening
helps putting a lid on costs. Inflation pressures thus look
set to moderate even further in future, extending the peri-
od of core inflation markedly below the 2% target. This Reduced pressure on domestic market
may cause some concern for the Riksbank as it could
contribute to further accelerating the decline in inflation
expectations.

The door is thus open for monetary easing. With low in-
flation, a weaker labour market, low policy rates interna-
tionally and a risk of further SEK appreciation, the Riks-
bank should cut rates this year. But when the economy
starts to recover in the latter part of 2013, the bank will
embark on a hiking cycle.

A paradigm shift for the SEK
The SEK has become a safe-haven currency in 2012. The
reasons are the modest exposure of the Swedish economy
to troubled areas, solid public finances and a highly com- Paradigm shift for SEK
petitive business sector that generates surprisingly strong
growth and increased interest rate differentials. Going
forward, we expect the SEK to weaken versus the EUR
in step with a gradual stabilisation of the situation inter-
nationally and a narrowing of interest rate differentials.
However, EUR/SEK will remain at levels below 9
throughout the forecast period. The USD will continue to
strengthen against most currencies, including the SEK.

Torbjörn Isaksson
torbjorn.isaksson@nordea.com +46 8 614 8859


■ Norway

Risk of overheating may be the biggest challenge
• Strong domestic demand growth feared. Some export industries are facing difficulties, but
for instance strong growth in electricity exports has put a
• High immigration prevents overheating floor under total export growth. However, while this
• And Norges Bank may proceed with caution trend is probably only temporary, the strong growth in
exports within the engineering industry should continue.
The Norwegian economy is showing few signs of weak- It reflects the increasing significance of the oil services
ness and we see no reason to change our optimistic view industry for Norwegian exports. With sustained high oil
of the economy going forward. Growth looks set to be prices, prospects are good for this type of exports in the
high, but with increased labour immigration an overheat- years ahead. Over the forecast period we also see growth
ing of the economy and sharply rising costs will probably in traditional exports rising, driven by stronger traditional
be avoided. Wage growth will be much higher than in export market growth.
neighbouring countries, but not so high as to push infla-
tion above target. However, strong economic growth and The exceptionally strong growth in Norwegian oil in-
higher capacity utilisation point to higher interest rates vestment has been vital for the oil services industry.
during the next couple of years. But fears of excessive Growth will likely slow in coming years, but it will still
NOK strengthening limit Norges Bank’s room for ma- remain very high. In our view, capacity limitations in
noeuvre in monetary policy. many areas will prove the key obstacle to growth in this
industry. Pressures in this part of the economy seem to be
Strong consumption growth one of main reasons why the wage negotiations, despite
Strong wage and employment growth and very low infla- all the talk of competitiveness and the so-called
tion currently boost consumer purchasing power. It is “frontfagmodell” (meaning that the negotiations start in
therefore no surprise that consumption growth in H1 the industries particularly exposed to competition), result
2012 was very high after last year’s weaker-than- in pay rises in manufacturing way beyond those in rival
expected trend. And with an initial high level of savings countries.
and a sustained strong labour market we see consumption
growth continuing unabated during the remainder of the We also see fairly strong growth in mainland investment
year and into 2013. In 2013 and 2014 consumption going forward, although the pace is not likely to match
growth should slow down as a result of higher interest that of oil investment growth. The propensity to invest
rates and more moderate employment growth. should be high with strong production gains in large parts
of the corporate sector. Higher credit margins and tighter
Higher exports, but lower mainland investment bank credit standards could slightly dampen investment
Despite weak growth in export markets, a strong NOK growth, but this effect will likely be largely offset by the
and wage growth well above levels in other countries, overall very low interest rate level. A possible sharp es-
mainland exports have remained at a higher level than calation of the euro crisis and a new financial crisis

Norway: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009(NOKbn) 2010 2011 2012E 2013E 2014E
Government consumption 531 1.7 1.5 2.0 2.5 2.5
Fixed investment 516 -5.2 6.4 7.2 4.9 3.7
- gross investment, mainland 349 -2.5 8.0 3.2 3.7 3.7
- gross investment, oil 144 -14.3 9.1 20.0 8.0 4.0
Stockbuilding* 14 1.9 0.3 0.0 0.0 0.0
Exports 929 1.8 -1.4 1.6 1.1 1.3
- crude oil and natural gas 416 -4.8 -6.2 2.5 0.0 0.0
- other goods 277 2.5 -0.4 0.0 2.0 2.5
Imports 660 9.9 3.5 3.0 3.9 3.0
GDP 2,357 0.7 1.4 3.4 2.4 2.3
GDP, mainland 1,876 1.9 2.4 3.7 3.0 2.8

Core inflation, % y/y 1.4 0.9 1.2 1.5 2.1
Annual w ages, % y/y 3.6 4.3 4.2 4.3 4.3
Current account (NOKbn) 313.6 393.9 437.1 482.9 497.5
- % of GDP 12.4 14.5 14.9 15.4 15.1
Trade balance, % of GDP 12.4 13.8 14.6 15.1 14.8

General govt budget balance (NOKbn) 284.5 375.1 400.0 435.0 450.0
- % of GDP 11.3 13.8 13.7 13.9 13.6


■ Norway

could, however, result in much tighter credit standards, Norwegian manufacturing production rises
and this is probably one of the key risks to the Norwe-
gian economy.

Inflation to edge higher
Strong domestic demand growth will contribute to strong
production growth in the years ahead. However, thanks
to high immigration we do not expect labour shortages to
become a major problem. Nor do we expect major bot-
tlenecks in the labour market despite shortages in some
skilled areas. Consequently, wage growth should not pick
up sharply, but still remain relatively high at just above
4% in the years ahead.

Wage growth just above 4%, strong domestic demand
Higher income growth -> higher consumption growth
growth and a relatively stable NOK suggest that inflation
will edge higher in coming years. Core inflation may rise
to 2% over the forecast period, up from 1% at present,
but to drive inflation above the 2½% target, cost growth
would have to be higher.

Gradually higher interest rates
Against the background of strong growth, a relatively
tight labour market, somewhat higher inflation and
slightly improved prospects globally, Norges Bank will
want to hike interest rates during the forecast period. Al-
so the steady increases in house prices and credit growth
from high levels suggest higher interest rates. However,
with below-target inflation and domestic economic
growth largely matching capacity growth, Norges Bank Supply and demand growth almost identical
will not be in a hurry. In the absence of rate hikes in
neighbouring countries, an aggressive monetary policy
line would only strengthen the NOK to levels that would
cause inflation to drop further below target.

At the time of writing the NOK has strengthened quite
significantly against the EUR, but measured in terms of
the trade-weighted exchange rate, the NOK strengthening
is far more modest. We expect Norges Bank to hike its
policy rate twice next year, but these moves should not
result in a long-lasting period of NOK strengthening. In
2014 the pace of monetary tightening may be increased
further, but as interest rates in other countries are also
likely to go up, Norges Bank can hike its policy rates
without risking excessive NOK strengthening. NOK not so strong in trade-weighted terms

There is a clear risk that the high domestic demand
growth could result in increased capacity problems, high-
er wage growth and consequently gradually higher infla-
tion than we project. If so, Norges Bank will act more
aggressively, accepting the effect on the NOK. And the
NOK strengthening would contribute to preventing infla-
tion from rising above target. If Norges Bank chooses to
focus less on meeting the inflation target and more on
preventing surging house prices and household credit
growth, the result may be a combination of higher inter-
est rates and a stronger NOK. However, judging from the
bank’s rhetoric it is not about to change its priorities.

Erik Bruce
erik.bruce@nordea.com +47 2248 4449


■ Finland

Finnish economy has cooled down across the board
• Exports will not recover until 2013 for instance, turned down again in the first half of the
year. In our forecast, we assume export volumes to con-
• Growth in private consumption will slow down tinue declining in the latter part of the year. The decreas-
• Employment will fall less than previously forecast ing world trade growth will weaken production expecta-
tions globally and decrease investment needs. This is bad
• Public sector deficit will decrease news to the Finnish export industry, as its main products
are raw materials, production supplies and investment
As expected, economic activity has decreased in Finland goods. We expect international demand to strengthen
across the board after the first quarter of this year. Ex- moderately in 2013. Export volumes will increase but
ports have contracted, investment has continued to de- growth will still remain modest.
cline and the growth in private consumption has slowed
down. Imports have decreased more than exports, which Growth in private consumption to slow down
is, in particular, a sign of weakening in domestic demand. Private consumption increased at a brisk pace in Q1 this
What is positive, is that employment has not yet weak- year compared to Q4 2011. This was a result of the one-
ened. However, it is probably only a question of time be- off additional salary items based on collective agree-
fore it does. ments, which boosted retail sales, and the car tax hike
that entered into force at the beginning of April, which
Based on preliminary data, the economy contracted in Q2 made people purchase new cars earlier than they other-
compared to the previous quarter. Our forecast assumes wise would have. The growth in retail sales volumes
that the decline continues in Q3. This means that we be- slowed down markedly in Q2 and in July it stopped alto-
lieve the Finnish economy is in recession, just like many gether. Car sales, too, have decreased sharply. Thanks to
other European countries. As in our previous forecast, the strong beginning of the year, private consumption
however, we believe the recession will not last long and will significantly boost the economic growth this year
there is no need to change the previous GDP growth despite the recent cooling.
forecast of 0.8% for this year. On the other hand, interna-
tional trade has cooled down more than expected, which For the remaining part of the year and for 2013, the out-
indicates that an export-led recovery from the recession look for private consumption will remain weak. The in-
will be much slower than previously estimated. That is crease in salaries and pensions as well as the decrease in
why we have lowered our forecast for economic growth mortgage interest rates will support households' purchas-
in Finland in 2013 to 1.2% (previously 1.6%). In 2014, ing power. The growth in purchase power will, however,
we expect growth to speed up to 2.8% as especially the be restrained by tax increases and the expected weaken-
North-European economies will recover. ing in employment. Taxes will increase as the value add-
ed tax will be raised and no inflation adjustments of in-
Exports will not recover until 2013 come limits will be made in the income tax brackets. In
Finnish goods exports have varied widely over the past addition, the rather rapid growth in consumer prices will
year – and the variation has taken place around a decreas- continue and erode purchasing power. Consumer prices
ing trend. New orders received by the industrial sector, are expected to rise by 2.5% next year. The household
Finland: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (EURbn) 2010 2011 2012E 2013E 2014E
Private consumption 94 3.3 2.5 2.2 1.3 2.0
Government consumption 43 -0.3 0.4 0.3 0.5 0.5
Fixed investment 34 1.9 6.8 -3.2 0.6 3.8
Stockbuilding* -2 0.5 1.1 -0.3 0.3 0.1
Exports 64 7.5 2.6 -1.7 2.6 7.1
Imports 62 6.9 5.7 -3.0 2.9 6.2
GDP 3.3 2.7 0.8 1.2 2.8
Nominal GDP (EURbn) 172.3 178.8 189.4 196.0 201.6 210.1

Industrial production, % y/y 8.3 0.9 -3.0 2.0 4.0
Hourly w ages, % y/y 2.6 2.7 3.5 3.0 3.0
Current account (EURbn) 2.9 -2.2 -0.5 0.4 1.2
- % of GDP 1.6 -1.1 -0.2 0.2 0.6
Trade balance (EURbn) 2.6 -1.2 -0.1 0.1 0.8
- % of GDP 1.4 -0.6 -0.1 0.0 0.4

General govt budget balance (EURbn) -4.5 -1.2 -1.0 -0.1 1.0
- % of GDP -2.5 -0.6 -0.5 -0.1 0.5
Gross public debt (EURbn) 90.0 93.0 99.0 104.1 108.4
- % of GDP 50.3 49.1 50.5 51.6 51.6

■ Finland

savings rate continues to decline which means that an in- Cooling of world trade brings problems to exports
creasing part of income is used for consumption. The ac-
commodating monetary policy is well timed as the con-
sumption outlook would be much gloomier without it.

Investment to decline, employment to weaken
The bleak short-term outlook for exports, production and
consumption as well as the major uncertainty over the
Euro area developments will eat away economic agents'
confidence and thus decrease willingness to invest and
weaken employment prerequisites. Machinery and
equipment investment increased sharply last year but
turned down again already in the beginning of this year.
The decline is expected to continue at least for the rest of
this year. Construction investment is also expected to de-
Weak sentiment points to an outright fall in GDP
cline. The decrease in the number of granted construction
permits indicates that the decline in residential and other
construction will continue and even steepen during the
latter part of the year. Reconstruction will compensate
for the decline in new construction.

We expect both the traditional machinery and equipment
investment and construction investment to increase again
in 2013. A precondition for this, however, is that the
global economy will grow as forecast, the Euro area debt
crisis will clear up and confidence will return.

The labour market has provided very positive surprises
this year. Employment measured with the number of
people has not weakened (although the number of work- A decline in GDP is bad news for employment
ing hours has probably started to decrease) and the num-
ber of unemployed people has not started to increase.
Seasonally adjusted unemployment rate has stabilised at
7.5% in recent months. The unemployment rate for 2012
seems to remain at 7.7% (the previous forecast was
8.0%), which is lower than in 2011. We still expect un-
employment to increase, especially in 2013 with the un-
employment rate rising to an average of 8%.

Slower decrease in public sector deficit
Tax revenues will increase at a slower pace due to the
sluggish economic growth, even though income taxation
will be tightened and value added tax will be raised. The
public sector deficit will, however, continue to decline.
The deficit is estimated to decrease to 0.1% of GDP in Confidence + labour market = weak consumption
2013 and turn into a small surplus in 2014. The govern-
ment's annual borrowing need will remain at EUR 4–6bn
during the forecast period, which will increase the public
debt close to 52% of the value of total production already
in 2013.

Pasi Sorjonen
pasi.sorjonen@nordea.com +358 9 165 59942


■ USA

Moving slowly forward
• If a perfect storm of fiscal chaos is avoided … After all, the economy’s fundamentals are much im-
proved. Businesses are highly profitable, banks have re-
• ... progress towards full employment in 2014 capitalised and the deleveraging process in the private
• Stronger underlying inflation pressures set to emerge sector has come a long way. Still, households – especial-
ly younger families – are likely to continue the process of
• Fed to start tightening by mid-2014 balance sheet repair. Home prices seem to have bot-
tomed, but the expected slow price increases provide lim-
US economic growth is likely to remain moderate in the ited support to household net worth going forward.
next few years through 2014, constrained by household
deleveraging, fiscal restraint, subpar global demand, In 2014 growth is expected to slow to a pace more in line
slower working-age population growth and a deteriora- with potential. Full employment, defined as an unem-
tion of job skills. ployment rate of 7%, should be achieved in late 2014.

The US economy clearly lost momentum during Q2 QE3 only in case of policy errors
2012, but recent economic data paint a slightly brighter The effects of the drought in the Midwest on food com-
picture, pointing towards GDP growth of 1½-2% in H2 modity prices and a rebound in oil prices are likely to
2012. Stronger disposable income growth, easier finan- push headline inflation meaningfully higher by mid-
cial conditions and bank lending standards, continued 2013.
housing recovery, the end of the payback for the warm
winter weather and less drag from seasonal adjustment With the business cycle adjustment more or less com-
distortions suggest that economic momentum will pick pleted in 2014, signs of stronger underlying inflation
up slightly in the near term. pressures are projected to emerge in the latter part of the
forecast horizon. As a result, we expect the Fed to start
However, while the threat from the Euro-area crisis cur- raising policy rates and gradual unwind its securities
rently appears less menacing, US fiscal challenges holdings around mid-2014.
around the end of this year imply that risks to the US out-
look over the next two to three quarters remain tilted to In the more immediate future, however, the Fed is likely
the downside. The probability of another US recession is later this month to postpone the expected first rate hike
uncomfortably high at 20-25%, in our view. from late 2014 to mid-2015. In our view, the central bank
is currently overestimating the labour market slack and
On the other hand, an orderly resolution of the pending hence underestimating the longer-term risk of inflation.
fiscal issues, as assumed in our baseline scenario, should Additional asset purchases (QE3) by the Fed are not ex-
pave the way for stronger confidence and hence brighter pected unless the Euro-area crisis blows up again or if
economic prospects in 2013, when growth is projected to US policymakers fail to resolve the pending fiscal issues
exceed potential assumed at around 2% annually through in an orderly manner.
most of the year.

USA: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (USDbn) 2010 2011 2012E 2013E 2014E
Private consumption 9,845.9 1.8 2.5 1.9 2.0 2.1
Government consumption and investment 2,967.2 0.6 -3.1 -2.0 -0.9 -0.3
Private fixed investment 1,703.5 -0.2 6.6 9.4 6.9 6.9
- residential investment 354.2 -3.7 -1.4 11.7 9.4 12.4
- equipment and softw are 898.3 8.9 11.0 8.3 6.9 6.0
- non-residential structures 451.1 -15.6 2.8 10.2 4.5 3.5
Stockbuilding* -154.2 1.5 -0.2 0.2 0.1 0.0
Exports 1,587.5 11.1 6.7 4.3 5.2 5.3
Imports 1,976.2 12.5 4.8 4.2 5.7 5.4
GDP 2.4 1.8 2.2 2.0 2.2
Nominal GDP (USDbn) 13,973.7 14,498.9 15,075.7 15,716.1 16,276.1 16,885.0

Industrial production, % y/y 5.4 4.1 4.0 4.0 4.3
Consumer prices ex. energy and food, % y/y 1.0 1.7 2.1 2.2 2.2
Current account (USDbn) -442.0 -465.9 -471.5 -569.7 -506.5
- % of GDP -3.0 -3.1 -3.0 -3.5 -3.0

Federal budget balance (USDbn) -1,293.5 -1,300.0 -1,100.0 -900.0 -700.0
- % of GDP -8.9 -8.6 -7.0 -5.5 -4.1


■ USA

A perfect storm of fiscal chaos hopefully avoided Moving slowly forward
Three US fiscal issues pose a threat to the economic out-
look: the so-called fiscal cliff, another increase in the
Treasury debt ceiling and the need for longer-term fiscal
sustainability.

As we approach the end of the year, attention will focus
even more sharply on the risk of the fiscal cliff – the un-
fortunate coincidence of about USD 600bn in tax in-
creases and spending cuts that will take effect next year,
should Congress not act to change current law. Failure to
scale back the fiscal cliff could knock as much as 4¼%
off real GDP in 2013, enough to push the US economy
back into recession. Moreover, the Treasury is likely to
hit the debt ceiling again in December. Assuming it uses
Slow progress towards full employment in late 2014
the accounting strategies that have been employed in the
past, the Treasury seems likely to be able to finance gov-
ernment operations under the current limit until some-
time in February 2013, by which point Congress must
raise the debt ceiling. Failure to do so would imply de-
fault on some of the US government’s obligations.

With both political parties in full campaigning mode,
none of these issues are likely to be resolved before the
presidential elections on 6 November. As seen too often
during the past two years, there will most likely be plenty
of political brinkmanship and the accompanying uncer-
tainty will probably come at a cost to the economy and
the financial markets later this year and in early 2013.
The longer the uncertainty persists, the more likely it will Stronger underlying inflation pressures in 2014
hurt confidence, hiring, investment and spending.

However, our expectation is that when pressured by the
threat of another recession, policymakers will take action
to reduce the fiscal drag on growth (to around 0.5% of
GDP) either during the so-called lame duck session after
the election or in January when the new government
takes office. Obviously, the outcome of the November
elections will be very crucial to how the fiscal debate
plays out. In this context, the congressional election re-
sults will be at least as important as who wins the White
House, Obama or Romney.

Extending the otherwise expiring tax cuts and other eas-
ing measures and repealing the automatic federal spend- Recession if economy is pushed off the fiscal cliff
ing cuts would significantly reduce the risk of recession, 1 1
% points Fiscal policy impact on GDP growth % points
but at the cost of a substantially larger budget deficit.
0 0
Thus, with an extension of current policy federal debt
held by the public would rise from 70% of GDP today to -1 -1

around 90% by 2022 compared to around 60% if current
-2 -2
law is not changed. In other words, apart from resolving
the fiscal cliff issue and raising the debt ceiling policy- -3 -3
makers will also soon have to address the need to restore
-4 -4
longer-term fiscal sustainability in order to shift the risk
Current law Current policy
to the economic outlook from negative to positive. -5 -5
2011 2012 2013
Source: Nordea Marktes, Congressional Budget Office and Office of
Johnny Bo Jakobsen Management and Budget
johnny.jakobsen@nordea.com +45 3333 6178


■ Euro area

Restore confidence to end the recession
• Gradual recovery from year-end Restoring confidence is key to recovery
Why do we expect a recovery when numerous problems
• Helped by smarter interventions remain unsolved and deleveraging has only just begun?
• Significant downside risks to inflation Well, because we believe that decisions have been taken
and will be taken in the coming months that are decisive
• Spain heading for deeper recession and will help gradually restoring confidence in the Euro
area. After all, monetary policy is extremely lenient, ex-
The Euro area is in recession. The second quarter showed port markets are growing decently, the EUR is weaken-
GDP contraction and the third quarter most likely will ing and even if more fiscal tightening will be needed in
too. We expect a recovery starting around year-end and a the years to come at least the pace of tightening will be
very gradual pick-up of momentum during 2013. In 2014 slower. Confidence is the missing ingredient that will al-
growth will still be somewhat below the pre-crisis “nor- low these factors to work and pave the way for a very
mal” level. gradual recovery.

We have made a modest upward revision to growth this Restoring confidence takes more time than eroding it,
year, but otherwise kept the Euro-area forecast roughly and we do not in any expect that the debt crisis is about
unchanged compared with our May forecast revision. We to end. Solving the crisis requires massive deleveraging
have revised down our growth forecast for Spain in 2013 in the years to come, structural reforms, growth and
after the announcement of new austerity measures during building new credible institutions to prevent the same
the summer. kind of crisis from happening again. Restoring confi-
dence also requires that Greece starts implementing the
Recovery from year-end reforms agreed with the Troika.
It is fair to say that signs of recovery have been scant up
to this point. However, the most forward-looking indica- Interventions will work this time
tors for growth in the Euro area as a whole have at least In terms of the decisive action, the ECB seems ready to
stopped falling and stabilised at low levels. bring out Big Bertha – more or less the entire arsenal of
instruments is being considered. We believe ECB inter-
The contraction in Q2 was not as severe as one might ventions in the secondary market – done smarter this
have expected given the financial stress during that peri- time – combined with intervention in the primary market
od with Greek post-election chaos and a Spanish bank by the EFSF/ESM will reduce the level of stress in finan-
bailout. Some lagged adverse impact on the economy is cial markets and help restore the confidence that is need-
likely to be visible in the Q3 growth numbers, but we ex- ed to embark on a path to recovery.
pect Q3 to mark the bottom of the current business cycle. When the ECB intervened through its old programme
(the SMP) it did not work very well. Rather it reduced
Another reason that the Q2 numbers were not as bad as the incentive for eg Italy to do the right thing. Therefore,
feared is Germany. German growth remained resilient interventions to reduce financial stress never became
during the first half of the year driven to a large extent by credible. This time, the ECB will intervene with strict
the export sector and to some extent also the German conditionality – ie only in countries that have a bailout
consumers. At present, the survey-based indicators point programme with promises to reduce budget deficits and
to slightly negative growth in Germany in Q3.

Euro area: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (EURbn) 2010 2011 2012E 2013E 2014E
Private consumption 5,128 0.9 0.2 -0.8 -0.4 0.3
Government consumption 1,987 0.7 -0.3 0.2 -0.9 -0.8
Fixed investments 1,735 -0.2 1.6 -3.0 1.1 2.4
Stockbuilding* -48 0.7 0.3 -1.2 -0.1 0.5
Exports 3,272 11.0 6.3 1.6 4.9 1.6
Imports 3,155 9.4 4.1 -2.3 2.9 1.4
Net exports* -0.8 0.7 1.0 1.6 1.0 0.2
GDP 1.9 1.5 -0.4 0.6 1.7
Nominal GDP, EUR bn 8,917 9,155 9,410 9,512 9,725 9,804

Industrial production, % y/y 4.3 2.7 -2.6 2.9 5.8
- core inflation** 1.0 1.7 1.6 1.2 1.0
Current account, bn EUR -3.2 -1.1 33.1 21.0 17.0
Current account, % of GDP 0.0 0.0 0.3 0.7 1.0
General government budget balance, % of GDP -6.2 -4.1 -3.7 -3.0 -2.5
General government gross debt, % of GDP 85.3 87.2 90.9 93.9 96.4



■ Euro area

undertake reforms – which will make actions on both Gradual recovery from year-end
sides more credible. The ECB can intervene in large
amounts and significantly reduce financial stress because
the ECB does not have to rely on market pressure. In-
stead, the crisis bailout country will have to continuously
meet the agreed conditions, or it not only risks losing ac-
cess to the cheap bailout loan but also to the “free” ECB
interventions.

Within the next few months we expect Spain to ask for
interventions from the bailout funds and hence from the
ECB. Italy could follow late this year, as it could be a
way for the current premier to secure budget discipline
beyond the April 2013 general elections. Such a political
manoeuvre could make the next government obliged to
Confidence is crucial
continuously meet the conditions that Mr Monti agrees
upon to get ECB support, or the ECB stops intervening.

Limited underlying inflationary pressure
Consumer price increases are likely to remain above 2%
in the coming quarters despite the ongoing recession.
Higher food and energy prices as well as indirect tax
hikes in some countries will keep the headline numbers
elevated. Underlying inflation will, however, gradually
fall throughout most of this year and 2013 before picking
up modestly in 2014. Risks are skewed significantly to
the downside throughout the forecast horizon. Upside
risks to inflation from the very easy monetary policy are
unlikely to materialise within our current forecast hori-
zon. Consumer price increases remain elevated

Spain heading for deeper recession
Since our most recent forecast update, Spain has taken a
EUR 100bn bank bailout and announced new austerity
measures totalling EUR 65bn until 2014. The bailout of
Spanish banks seems sufficient to cover near-term capi-
talisation needs, as it has also been confirmed by inde-
pendent consultants. However, the banking sector re-
mains a key concern as the economy heads deeper into
recession.

Key elements of the austerity package include a VAT
hike from 18% to 21% from September this year and cuts
in benefits and public wages. As a consequence, we have
revised down our forecast for growth in both 2012 and Monetary policy is extremely lenient
2013. On a more positive note, we do expect intervention
in Spanish sovereign bonds by the ECB and the rescue
funds and a somewhat reduced level of financial stress.

Anders Svendsen
anders.svendsen@nordea.com +45 3333 3951


■ United Kingdom

UK growth stalling – awaiting outside help
The UK economy has been moving at stall speed lately. Stalling recovery
Four years after the Great Recession first hit the shores of
the British Isles, the economy is still 4% below its pre-
crisis peak and the economy has contracted for the past
three quarters.

Lately, several events have been heavily influencing eco-
nomic key figures: The Queen’s Diamond Jubilee gave
an extra day off in Q2 that showed up as weakness in the
figures; the weather was horrid, which has depressed re-
tail sales, and finally the 2012 Olympics is expected to
give an extra (albeit temporary) boost to consumption
and employment during Q3.

We are somewhat puzzled by the development in the la-
Capacity dwindling
bour market. Employment has increased by 330k over
the past year and while some of those jobs most likely
are related to the Olympics, they have come too early.
This could be an indication that the GDP figures are un-
derestimating actual growth or a sign of labour hoarding,
which could pose a downside risk if the economy fails to
gain traction.

With the UK government’s continued focus on downsiz-
ing the public sector, growth is expected to come from a
normalisation in exports as export markets recover and a
modest recovery in private consumption and growing in-
vestment (as an aside, with this forecast total private con-
sumption will still be 1% shy of the 2007 level at the end
of the forecast horizon). With industrial capacity utilisa- Growth slowly recovering
tion above 80%, we expect this to drive investment in
new machinery.

The Bank of England (BoE) will keep trying to support
the economy through more asset purchases (we expect
another GBP 50bn to GBP 425bn) and the Funding for
Lending Scheme (FLS) which should give incentives for
banks to increase lending to the real economy.

Steen V. Grøndahl, CFA
Steen.grondahl@nordea.com +45 3333 1453

United Kingdom: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (GBPbn) 2010 2011 2012E 2013E 2014E
Private consumption 912.8 1.3 -1.0 0.1 1.7 2.4
Government consumption 327.9 0.4 0.1 1.5 -2.0 -1.5
Fixed investment 208.7 3.5 -1.4 0.6 3.2 6.3
Stockbuilding* 0.9 0.3 -0.1 -0.1 -0.1
Exports 404.2 6.4 4.4 -0.4 3.8 3.2
Imports 424.8 8.0 0.5 2.3 3.3 4.1
GDP 1.8 0.8 -0.4 1.0 1.7
Nominal GDP (GBPbn) 1401.8 1466.6 1516.2 1548.1 1592.1 1641.1

Current account, % of GDP -2.5 -1.9 -2.3 -2.1 -1.3
General govt budget balance, % of GDP -10.4 -8.3 -7.6 -6.4 -4.7


■ Japan

The challenges remain in the long term
The Japanese economy is undergoing a domestic-led re- The recovery is losing speed
covery. As a result of strong post-earthquake restoration
activity, the growth rate in the first half of 2012 averaged
3.2%. The pace of recovery is likely to slow during the
remainder of the year, with reconstruction spending
dwindling and private consumption decelerating as in-
centive programmes expire. In the meantime, sluggish
exports to its major trading partners and Japan’s depend-
ence on energy imports will continue weighing on its
trade balance. As a whole, the economy will expand by
2.5% annually this year. We believe activity will deceler-
ate further in 2013 and 2014 to 1.6% and 1.1%.

Private consumption has been the major driver behind the
robust recovery earlier this year, thanks to incentive pro-
The tax hike will cause consumption frontloading
grammes for eco-cars. However, the budget for eco-car
subsidies is likely to be used up very soon, so auto sales
will see a significant drop. As a result, private consump-
tion is estimated to be close to zero by the end of 2012.
Based on prior experiences, a consumption tax rate hike
is likely to accelerate private demand in the quarters pre-
ceding its effective date. Thus, we expect to see a consid-
erable but temporary upswing in economic activity in the
period between late 2013 and early 2014 due to the con-
sumption tax rate hike effective from April 2014.

Reducing the public debt burden is a top priority, but this
task is complicated by low growth, persistent deflation,
and a rapidly aging population. The consumption tax rate
hike effective from April 2014 is a first step towards fis- Social security biggest share of public expenditure
cal reforms, but it is far from sufficient to meet the re-
quired adjustment of 10% of GDP over the next decade.
The debt-to-GDP ratio can be stabilised through deep
cuts in social security spending which is the largest and
fastest growing component of government expenditure.
Alternatively, the consumption tax could be hiked fur-
ther. Currently, Japan has the lowest tax rate on con-
sumption among OECD countries. However, both op-
tions require strong political commitment.

Amy Yuan Zhuang
Amy.yuan.zhuang@nordea.com +45 3333 5607

Japan: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (JPYbn) 2010 2011 2012E 2013E 2014E
Government consumption 93,863 2.2 2.0 1.4 1.3 1.1
Gross fixed capital formation 97,914 0.2 0.9 3.6 1.7 1.2
Stockbuilding* -5,314 0.7 -0.4 1.0 -0.1 -0.2
Exports 59,754 24.5 -0.1 2.2 4.0 4.2
Imports 58,094 11.2 6.3 6.7 5.2 5.0
GDP 4.6 -0.7 2.5 1.6 1.1
Nominal GDP (JPYbn) 471,060 481,857 468,343 487,077 498,279 508,245

Consumer prices, % y/y -0.7 -0.3 0.2 -0.1 -0.1



■ Poland

Slowdown under control
• Economy losing momentum Fourth, Polish central bankers have ignored threats to
economic growth until recently and they raised interest
• Fiscal consolidation likely to be put on hold rates in May. This controversial hike made the bank one
• Interest rate cuts just a question of time of a few central banks in the world fighting inflation in-
stead of fighting for growth. The move has had an ad-
• PLN stronger amid yield hunting verse effect on investment and consumption decisions
and magnifies the negative impact on lending activity of
Slowdown underway the tightening of regulations by the Polish FSA.
Until the end of 2011 Poland seemed to defy economic
gravity, with an acceleration in GDP growth in Q4 last Given the prolonged economic downturn in the Euro-
year despite recessionary tendencies in the Euro area, area, stronger-than-expected tightening of domestic eco-
which takes up over 50% of Polish exports. However, in nomic policy (not only fiscal consolidation, but also in-
line with our view, the situation has changed early this terest rate hikes), we have revised down our GDP growth
year as all drivers of Polish growth shifted into lower forecasts for Poland. Now we predict that the country’s
gear. economic growth rate could dip below 3% this year and
slow down even further in 2013. Compared with its re-
First, although with some lag, the Euro-area woes have gional peers and other parts of the EU, Poland would still
finally started to bite. The weakening external demand outperform, but the slowing growth to below 2% y/y
has been gradually filtering through to the Polish econo- (and below 0% q/q sa) in some quarters will be a marked
my and a long-lasting drop in the inflow of new export change for the country, which was the only one in the EU
orders negatively affects exports and industrial output. to avoid recession during the first wave of the crisis in
This time the PLN does not work as an external shock 2008-2009 and grew a robust 4.3% in 2011.
absorber because it has shown an appreciation trend since
the start of this year, contrary to sharp depreciation in Policy response?
late 2008 and early 2009 when external demand also We think that the Polish authorities have some tools
slumped. available to avoid a deeper slowdown and to keep it un-
der control. First of all, there is room for some monetary
Second, the fiscal consolidation that began in 2011 and policy action. Some central bankers have already sup-
continued in 2012 has started to take its toll. Struggling ported officially submitted motions to trim rates in July,
to escape from an excessive deficit procedure imposed by but they were a small minority (merely one MPC mem-
the European Commission, the government sharply cut ber out of 10 supported the motion to cut rates by 50 bp
spending, mainly public investment. This, coupled with and only two members voted for a cut of 25 bp). Hawks
the end of preparations for the UEFA Euro 2012, led to a raised rates only two months earlier and may not want to
notable weakening in activity in the construction sector. be seen performing a dramatic U-turn now. However, we
believe that in early 2013 at the latest they will gain a
Third, consumption growth is slackening amid a deterio- majority on the rate-setting panel. Winning support for
ration of labour market conditions and adjustments of earlier cuts could be problematic given the persistently
households’ balance sheets. The latter largely involves a high inflation and new upside risks for the headline infla-
need to rebuild savings (following a decline in the sav- tion rate (tensions in the global food markets and with
ings ratio to historical lows) as there is no major delever- food accounting for a large share of the Polish CPI bas-
aging pressure on households given that the Polish pri- ket). Positive monetary impulses may be strengthened by
vate sector debt to GDP ratio is one of the lowest in the a possible easing of regulations on bank lending.
EU.

Poland: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (PLNbn) 2010 2011 2012E 2013E 2014E
Private consumption 810 3.2 3.1 1.9 1.9 3.3
Government consumption 249 4.1 -1.3 -0.1 0.0 2.0
Gross fixed capital formation 285 -0.4 8.1 3.3 -1.9 4.5
Exports 530 12.1 7.5 -3.4 1.9 7.5
Imports 529 13.9 5.8 -5.5 -1.4 7.0
GDP 3.9 4.3 2.8 2.3 3.1
Nominal GDP (PLNbn) 1,344 1,416 1,525 1,625 1,691 1,781

Registered unemployment rate, % 12.4 12.5 13.1 13.2 12.5


■ Poland

There is some room to support the economy also on the Euro-area recession is taking its toll
fiscal policy side. Government officials have recently an-
nounced that fiscal consolidation would be continued on-
ly if it was not detrimental to economic growth. We read
this as an intention to revise previous ambitious plans of
fiscal deficit reduction to below 1% of GDP by 2015 as it
would be a step too far for the slowing economy. The
presentation of a further reform drive in September, an-
nounced by Prime Minister Donald Tusk before the
summer holidays, will most likely be supplemented by an
indication of measures aimed at stimulating economic ac-
tivity. However, the room for manoeuvre in fiscal policy
is constrained by EU deficit rules and domestic pruden-
tial limits on public debt. Moreover, any increase in the
government’s investment spending would not be very ef-
All growth drivers into lower gear
fective given the decreased inflow of EU funds in 2013-
2014 (before the new EU financial perspective for 2014-
2020 is fully operational from late 2014).

Possible policy stimulus will be too little and too late to
avoid a further slowdown during the remainder of 2012
and the first half of 2013, but together with the recovery
in the Euro area it should be enough to make economic
growth in Poland return to an upward trend. Economic
growth beyond 2013 could moreover be fuelled by a
gradual start of large-scale investment in the energy sec-
tor and positive supply side effects of the significant up-
grade of the road infrastructure over the past few years.

Improved credibility Ambitious fiscal targets likely to be revised
We estimate that Poland will manage to reduce the fiscal
gap to 3-3.5% of GDP in 2012, which will be enough for
the European Commission to remove the excessive defi-
cit procedure imposed on Poland and for rating agencies
to affirm Poland’s investment grade rating with stable
outlook. By keeping the deficit around 3% in 2013-2014
the government should be able to maintain its restored
fiscal credibility. Also the external relations look favour-
able with a moderate current account deficit likely to de-
cline further amid weakening domestic demand. With
improved credibility and no major economic imbalances,
Poland has been attracting large foreign capital inflows
and become an alternative to such classical safe-havens
as Germany where yields dropped below 0%.
Elevated inflation delays monetary easing
PLN stronger amid yield hunting
As long as the economic slowdown is under control and
the fiscal deficit remains in check, Poland will offer for-
eign investors a combination of relatively strong funda-
mentals and a yield pick-up. Therefore, we expect Polish
bonds to keep attracting interest and the PLN to remain
on an appreciation path. However, the record-high in-
volvement of foreign investors in the domestic debt mar-
ket is a significant risk factor for the PLN in the event of
a major deterioration of the country’s fundamentals
and/or a surge in global risk aversion.

Piotr Bujak
piotr.bujak@nordea.com +48 22 521 36 51


■ Russia

Inflation déjà vu
• Solid growth sustained, but softer H2 expected ficient. Russia's exporters will gain USD1.5-2bn a year
from the removal of existing trading barriers. Lower tar-
• Inflation acceleration will prompt CBR to act in H2 iffs on imported goods should lead to cheaper goods and
boost consumers’ spending power.
The Russian economy continued to expand by a relative-
ly fast pace of 4.4% during H1 supported by internal fac- The ongoing large government privatisation programme
tors, but we will likely see a soft patch in Q3 due to a is another vector of the Russian liberalisation policy. The
lagged response to the slowdown in export markets and USD 32bn privatisation plan in 2012-2014 and govern-
expected weather-related losses in the agricultural sector. ment intention to sell controlling stakes in such backbone
Household consumption is still the major source of do- companies as Sberbank, VTB and Aeroflot make us very
mestic growth. Supported by a healthy labour market, optimistic about the effect of the reform. Privatisation
consumer confidence is growing, unemployment has will continue to improve the country’s investment cli-
fallen below 6%, supporting real wage growth, and mate and attract more foreign funds.
household credit growth is expanding above 40% y/y; all Food prices a concern again
factors that support household spending. Having reached historic lows, consumer prices did not
The key risk to growth comes from Europe, as more than stay there for long. As expected, consumer price inflation
50% of exports go to the EU. However, the negative ef- bottomed out just below 4% y/y in late spring and picked
fect for growth from export markets is partially offset by up visibly over the summer. The favourable food price
the relatively low impact of net exports on GDP. effects waned and postponed tariff hikes were introduced
over the summer a few months after the elections.
Opening up
As was widely expected, Vladimir Putin won the presi- Food prices are escalating particularly fast: having bot-
dential elections in March for a new 6-year term, and Mr tomed at 1.2% y/y in April, food price inflation has
Medvedev was appointed prime minister. The latest sur- picked up to 5.5% y/y in July. The recent global food
veys confirm very high endorsement levels of Vladimir price increase on supply shortages, similar to the 2010
Putin and Dmitry Medvedev. However, the threat of in- food price spike, is a real risk for headline inflation for
creasing dissatisfaction of the middle class along with the the rest of the year. The Russian CPI basket is heavily
oil-oriented economy, force the current government to weighted in food prices (37,3%), which leaves headline
impose reforms in order to improve financial and busi- inflation exposed to further global food prices increases.
ness infrastructure. The WTO entry (23 August) is one of
the positive triggers on the way. We expect inflation to accelerate further, with headline
inflation rising above 6% y/y as early as in August, but it
Russia is now committed to bringing its laws and prac- will remain under 7% in coming months unless the RUB
tices into compliance with WTO rules. Russia’s com- depreciates and other food prices keep accelerating at
mitments include non-discriminatory treatment of im- previous months’ rates. In any case, we expect the central
ports of goods and services, reduction of tariffs and bind- bank action and tighter liquidity to help keep inflation
ing tariff levels, ensuring transparency when implement- below 8% over the forecast horizon.
ing trade measures, limiting agriculture subsidies, enforc-
ing intellectual property rights of foreign holders of such Monetary policy to be kept tight in coming quarters
rights and opening government procurement contract op- The Central Bank of Russia has kept its key rates un-
portunities to foreign firms. Entering the WTO will make changed in the previous quarter, but the post-meeting
Russia more attractive to foreign direct investment, communication has shifted from very dovish to rather
which will help the Russian industry to become more ef- hawkish in recent months. It seems that the CBR pays

Russia: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (RUBbn) 2010 2011 2012E 2013E 2014E
Fixed investment 8,536 6.1 6.5 7.2 7.8 8.0
Exports 10,992 7.1 3.5 3.8 5.5 6.5
Imports 7,954 25.6 14.5 9.5 12.0 12.5
GDP 4.0 4.4 4.2 4.8 5.0
Nominal GDP (RUBbn) 38,807 45,300 47,293 49,280 51,645 54,227

Central govt budget balance, % of GDP -4.0 0.5 0.2 0.5 0.7


■ Russia

more attention to accelerating inflation rather than to Record-low unemployment supports consumers
signs of slowing domestic growth momentum. The bank
will likely tolerate more sustainable credit and consump-
tion growth rates going forward, and try to maintain in-
flation close to its target of 6% for this year and towards
the government’s 4-5% goal for the coming years.

Now that inflation is accelerating and the risks are to the
upside due to food prices, the CBR will not hesitate to
act by hiking benchmark repo rates in H2 if inflation de-
viates from target. In the meantime, the CBR will intro-
duce effective policy tightening by preventing a rise in
interbank liquidity (by reducing provision via repo, less
FX intervention), which will keep money market rates at
high levels.
Inflation accelerating again

RUB wants to break free
The moves to more RUB flexibility continue. The Cen-
tral Bank of Russia widened the RUB basket (55% USD
and 45% EUR) floating corridor band by 1 RUB as of 24
July to currently 31.65 – 38.65. The CBR has scaled
down its presence in the FX market significantly over the
past two years, which is part of its attempts to move to-
wards an inflation-targeting regime.
The widening of the RUB floating band was the fourth
such move since 2010 towards the promised “free float”
by 2014, and we expect similar steps by 6-month inter-
vals by the end of 2013. Allowing more RUB flexibility
gives more freedom to change rates without the CBR The tightening cycle will continue in H2
having to absorb the capital inflows (and increase inter-
bank liquidity).

With inflation increasing, the CBR will also be biased
towards more RUB strength (each 1% in strength of
RUB effective exchange rate brings headline CPI down
by 0.25%, if sustained), hence expect also “open mouth”
operations each time the RUB weakening risks arise.

A more flexible RUB will be more reactive to market
prices, which creates both strengthening opportunities
and risks. We see a much stronger RUB, on average,
based on our oil forecast of close to USD 120/bbl this
year (above the budget average of USD 100/bbl for the
coming years). We also see Russia being more attractive CBR keeps widening RUB floating bands
for foreign investors, with sovereign debt/GDP barely
around 10%. But the flipside of more RUB flexibility is
that any global factors will hit RUB, with episodes of
weakening along the way.

Aurelija Augulytė
aurelija.augulyte@nordea.com +45 3333 6437

Dmitry Savchenko
dmitry.savchenko@nordea.ru +7 495 777 34 77 4194


■ Estonia

Economy remains in a soft patch
Growth continued to moderate in the first half of 2012 in Manufacturing has stabilized, headwinds remain
tandem with weaker prospects in key export markets.
According to the flash estimate, growth slowed to 2.0%
y/y in Q2 from 3.7% at the beginning of the year. Com-
pared to Q1 GDP grew by a still decent 0.4% (sa). The
modest export growth is attributable to weaker demand
for industrial goods in Europe and reduced energy ex-
ports. Compared to Euro-area peers, Estonian manufac-
turing performance has proven relatively resilient to the
ongoing debt crisis, with production down only 1% y/y
by mid-year. To some extent this reflects the business
sectors’ integration with stronger Nordic countries as
well as an ability to adjust to new economic circumstanc-
es. Low investment demand and soft confidence in the
Euro-area are likely to depress exports in H2, but a grad-
Corporate income and profits have largely recovered
ual recovery is expected from spring next year.

As expected, the economy has now entered a soft patch.
Growth is driven by domestic demand, which is reflected
in higher contributions from the construction, trade and
information and communication sectors. The increase in
turnover and the favourable cost level continue to support
profit growth and hence investment. Private investment
is largely driven by a need to expand business volumes
and upgrade technologies and production. Two key in-
vestment areas are machinery and equipment, and build-
ings and structures. Investment demand is also reflected
in the gradual pick-up of loan demand. Another bright
spot for the economy is consumption and in particular re-
tail sales as consumer confidence has recovered to its his- Only slight moderation in retail sales expected
torical average. Stable labour markets and moderate
wage growth are likely to support retail sales, with only a
slight moderation expected in H2.

Overall, the recovery remains vulnerable to the resur-
gence of the sovereign debt crisis. The main scenario is,
however, a gradual pick-up in stronger export markets
such as the Nordics and Germany next year.

Tönu Palm
tonu.palm@nordea.com + 372 628 3345

Annika Lindblad
annika.lindblad@nordea.com + 358 9 165 59940

Estonia: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (EUR bn) 2010 2011 2012E 2013E 2014E
Private consumption 7.41 -1.7 4.2 3.8 3.4 3.7
Government consumption 3.05 -1.1 1.6 2.0 0.9 1.2
Fixed investment 2.97 -9.1 26.8 10.0 6.5 7.0
Exports 8.96 22.5 24.9 3.7 6.5 6.5
Imports 8.15 20.6 27.0 6.5 6.8 6.6
GDP 2.3 7.6 2.3 3.5 3.8
Nominal GDP (EURbn) 13.84 14.3 16.0 16.9 18.0 19.2

Current account, % of GDP 3.8 2.1 -2.3 -1.5 -1.3


■ Latvia

Economy keeps delivering positive surprises
The economy keeps delivering positive surprises for the GDP still on a steady upward trend
second consecutive year. After a 6.9% y/y expansion in
Q1 2012, the preliminary GDP estimate for Q2 showed
an increase of 5.1%. Quarterly growth was estimated at
1.0% (sa), unchanged from Q1. Export demand appears
to have been an important driver of growth as the indus-
trial volume index grew by 1.8% q/q and the value of ex-
ports kept increasing. Fixed investment has likely been
driving domestic demand, while retail sales stagnated
compared to Q1. While we expect growth to slow in H2
as a result of the Euro-area debt crisis weighing on de-
mand in main export markets and statistical base effects,
we have increased our growth forecast for 2012 to 4.2%.

Public finances are sound. The budget deficit is likely to
Latvian exports gaining market share
remain below 3% of GDP even after the VAT base rate
cut from 22% to 21% in July, while net public debt is
slightly above 30% of GDP. The state treasury’s total
deposits with the Bank of Latvia exceed EUR 1.6bn or
about 8% of GDP, which is enough to cover the budget
deficit and meet other obligations throughout 2012 and
2013. However, the first signs of external imbalances are
appearing. Although this is still not worrying, the current
account deficit is estimated to be just below 3% of GDP
in H1 2012. The reduction of indirect taxes is moreover
likely to slightly boost imports in H2.

Inflation is slowing largely due to the VAT cut. Lower-
ing the VAT can be interpreted as a signal that the gov-
ernment is serious about adopting the euro in 2014. Es- Inflation slowing, but above the criterion
pecially the inflation criterion is subject to many risks
beyond the government’s control, including global food
prices. The 12M average inflation rate in Latvia is still
slightly above the 3% currently required. The inflation
criterion currently includes for example Greece where in-
flation is slowing, which is likely to push the criterion
lower. At the same time an increase in food prices would
have a significant impact on inflation in Latvia as the
weight of food in the consumption basket is among the
highest in the EU.

Andris Strazds
andris.strazds@nordea.com + 371 6 7096 096

Latvia: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (LVLmn) 2010 2011 2012E 2013E 2014E
Government consumption 2,557 -9.7 1.3 0.5 1.0 1.0
Fixed investment 2,820 -12.2 24.6 15.2 4.5 7.8
Exports 5,742 11.5 12.6 6.2 4.0 6.3
Imports 5,935 11.5 20.7 6.3 4.5 6.8
GDP -0.3 5.5 4.2 2.5 3.9
Nominal GDP (LVLmn) 13,070 12,739 14,161 15,080 15,830 16,890

Consumer prices, % y/y -1.1 4.4 2.3 2.5 2.8
Current account, % of GDP 3.0 -1.2 -3.2 -3.5 -3.6


■ Lithuania

Showing resilience
The Lithuanian economy remains resilient to the on- Resilience of retail trade and industrial production
going European sovereign debt crisis and continues to
grow albeit at a slower pace than in 2011. Annual eco-
nomic growth slowed to 3.9% in Q1 2012 and further to
2.1% in Q2 2012, but is forecasted to remain positive,
averaging 2.7% and 3.3% in 2012 and 2013, respectively.

Weaker-than-anticipated growth in Q2 2012 was above
all the result of a temporary shutdown of the Orlen
LiLetuva refinery (from end-April to mid-June) that ac-
counts for close to 30% of all industrial production in
Lithuania. Consequently, industrial production contract-
ed by 2.8% in Q2 2012 whereas excluding the production
of refined petroleum products, industrial production con-
tinued to grow at a robust 6.2% y/y.
Meeting Maastricht inflation criterion is a big “if”
After the temporary slowdown in April, retail trade
growth accelerated to 4.9% y/y in June with growth of
non-food items increasing to 12.1% y/y. Stable house-
hold sentiment suggests that retail trade growth should
remain in positive territory in coming months. As a re-
sult, private consumption will continue to play a leading
role in Lithuanian economic growth.

Inflationary pressures eased in Q2 2012, but average an-
nual inflation still stood at 3.6% in July – well above the
Maastricht convergence criterion of approximately 3.0%.
Even though inflation is expected to moderate to 3.0% by
the end of 2012, there is still a high probability that Lith-
uania will not be able to meet the Maastricht inflation cri- Budget deficit declining in line with expectations
terion in early 2013.

The budget deficit is gradually declining and is expected
to fall below 3% of GDP in 2012. Nonetheless, in case of
a more severe recession in the Euro zone, there is a risk
that the deficit will exceed the 3% mark and thus fail to
meet the euro convergence criteria. Overall, we see euro
adoption in 2014 as an unlikely scenario at the moment.

Žygimantas Mauricas
zygimantas.mauricas@nordea.com + 370 5 2657 198

Lithuania: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (LTLmn) 2010 2011 2012E 2013E 2014E
Private consumption 63,497 -4.9 6.1 3.5 3.2 3.3
Government consumption 20,180 -3.3 0.2 0.7 1.8 2.0
Exports 50,000 17.4 13.7 3.0 6.5 6.5
Imports 51,372 17.3 12.7 3.8 6.9 6.8
GDP 1.4 5.9 2.7 3.3 3.5
Nominal GDP (LVLmn) 91,913 95,074 106,019 112,100 118,800 126,500

Current account, % of GDP 1.1 -1.6 -2.7 -3.0 -3.0
General govt budget balance, % of GDP -7.2 -5.5 -2.7 -3.0 -3.0


■ China

Stability, stability and … stability
fallen according to People’s Bank of China’s quarterly
• Stabilising growth is once again top priority survey of bankers, so monetary tools may prove to be
• Leadership change in the spotlight less effective now. Thus, the central bank will remain
cautious in fear of increasing inflationary pressure and
• A close eye on local government stimulus plans misleading the markets regarding real estate controls.
• CNY volatility persists
Princelings to rule the country
Growth target is not imperilled The fifth generation of leaders since the establishment of
The government-induced slowdown in China as a part of the People’s Republic of China will take over power in
the transition towards a sustainable consumption-driven the autumn of 2012, when the 18th National Party’s Con-
economy ran into stronger-than-anticipated headwinds in gress is set to take place in Beijing. The Politburo Stand-
the first half of 2012. The uncertain outlook has prompt- ing Committee, the most powerful decision-making body
ed the authorities to make stable growth on top priority. in China, will replace all but two of its nine members. A
The latest monetary and fiscal stimulus measures will handful of senior officials are seen as the likely candi-
support growth in the second half of this year. dates to join the prestigious and secretive group. Most of
them come from prominent families within the Com-
In the near term, China’s economy remains vulnerable to munist Party, the so-called “Princelings”. They are better
external risks. According to Commerce Minister Chen educated and more internationally-oriented than their
Deming, China may risk not achieving 10% export predecessors. We believe the event will go smoothly, as
growth this year. Despite emphasis from Beijing, private the internal power struggles are probably resolved during
consumption has not taken the lead in driving growth. the top official meeting in Beidaihe in early August. We
While we expect it to take a bigger role in future, this do not expect any major reforms to be launched in the
will not happen anytime soon. Looking forward, China near future after the shift of power, since stability is val-
will continue relying on investments, the remaining ued over change.
growth engine, to ensure a steady growth rate. We esti-
mate GDP to grow by 8-8.5% in our forecast period Not only will the top leadership be replaced, but in the
2012, 2013 and 2014. country’s 31 provinces and province-level municipalities,
361 cities, 2,811 counties and 34,171 townships, millions
Inflation makes room for monetary policy easing of party members are also in the middle of being reshuf-
Inflation has decreased as expected due to moderating fled. Regional GDP has traditionally been a measure to
meat prices and basis effects. Full-year inflation will be evaluate their performance, so in the upcoming months
comfortably below the government’s target of 4%. The we will see intensified local emphasis on boosting
record-high global grain prices are likely to have little growth, mainly through investments.
impact on Chinese inflation. China is self-sufficient in
Property market – a balancing act
corn and wheat and it had a robust harvest this year. The
biggest impact on China's food inflation will be rising China’s property market was once dubbed the “most im-
soybean prices, since 80% of the domestic consumption portant sector in the entire global economy”. It remains a
is imported. However, based on experience from 2008, big fear hanging over the policy makers. The challenge is
the effect will not be significant. to balance between on the one hand bringing down house
prices and increasing housing affordability and on the
With the low inflation and uncertain growth outlook, the other hand preventing the cooling property sector’s nega-
political stand has shifted from balancing growth and in- tive spill-over on the domestic economy. The latest mod-
flation towards emphasising growth. We expect to see est rebound in house prices could be a result of the poli-
another rate cut before the end of Q3. Credit demand has cies to encourage real housing demand, but it may also
reflect a misreading of central government policy. Evi-

China: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (CNYbn) 2010 2011 2012E 2013E 2014E
Stockbuilding* 778 0.5 0.2 -0.4 0.0 0.1
Exports 9,106 -10.3 28.4 8.5 8.5 9.1
Imports 7,603 4.1 20.1 8.6 10.0 11.0
GDP 9.2 10.5 8.0 8.3 8.5
Nominal GDP (CNYbn) 34,632 39,431 45,590 50,655 56,986 64,394



■ China

dence suggests that some local governments have eased A steady GDP growth is desired
property restrictions surreptitiously regarding multiple
housing purchases, hoping to revive construction jobs
and land sales. We believe the central government will
maintain its favourable policies for first-time home buy-
ers, while continuing to rein in speculative demand and
tighten control of local implementations.

Local officials should be kept on a tight leash
The only economic anxiety to rival the housing market is
the local government’s investment plans which should
not be neglected. After recognizing that the 4trn yuan
package in 2008 was a mistake that left the country with
stubborn inflation, messy local-government finances and
skewed investments, the Politburo has rejected that its
Property prices show signs of mild recovery
2012 stimulus efforts might entail the same loss of disci-
pline as in 2008. However, this view is not shared by the
local authorities, which have all developed their own
ambitious plans. The most remarkable case is the Gui-
zhou province’s 3trn yuan investment on culture and
tourism, which is more than five times its 2011 GDP.
Even though not all projects will be approved by the cen-
tral administration, the local authorities have their ways
to circumvent the rules.

These projects will be financed through local government
financing vehicles which have already accumulated huge
off-balance-sheet debt. Several unofficial sources have
given their estimates on the size of the total local debt,
ranging from 50% to more than 100% of GDP (27% by Most investment funding through financial vehicles
official auditors). The high indebtedness raises concern,
as the profitability of these projects and their ability to
service the debt is doubtful. Numerous infrastructure pro-
jects have been found in poor quality without the ability
to withstand bad weather conditions. A government
study showed 30% of the 4trn investments from 2008
have failed. In addition, the local investment plans are
more likely to cause inefficient resource allocation and
overcapacity than if it was managed from the central.

CNY to continue its two-way volatility
The intensified slowdown in China has had a spill-over
on the CNY which has weakened remarkably against the
USD since May. Premier Wen Jiabao has reiterated that
the CNY is near its fair value and that a liberalised cur- Continued CNY volatility ahead
rency is not necessary a stronger currency. With the
shrinking current account deficit and sluggish economic
outlook, the top officials have an incentive to let the
CNY continue its weakening course in the short term. In
the longer term, we expect the CNY appreciation to con-
tinue, mainly because of the strong underlying growth in
China. The appreciation of the CNY is by no means over,
although we see a slower and more volatile trend ahead.

Amy Yuan Zhuang


■ India

A drought of growth
Economic activity in India began decelerating in late Weak domestic economy weighed on growth
2011 and the conditions have only deteriorated during the
first eight months in 2012, hampered by both domestic
and global factors. External demand has weakened fol-
lowing the slowdown in developed countries and China.
The domestic economy is severely hit by the poor mon-
soon (20% below normal) that led to falling agricultural
production and dropping rural incomes.

Despite falling over several months, WPI inflation, In-
dia’s key inflation measure, still has not moved closer to
the central bank’s comfort level of 5%. The below-
normal rainfall this year will hurt the crop output as 60%
of the production is rain-fed. The resulting higher food
prices and elevated fuel prices will keep inflation above
WPI inflation kept above the comfort level
the 5% mark in the short term. Consequently, the Re-
serve Bank of India is unable to utilise its monetary tools
to support the downward-trending economy. Thus, as in-
flation remains a major concern we expect the central
bank to leave the repo rate unchanged at 8% this year.
The stubbornly high inflation also erodes households’
purchasing power and dampens private consumption.

The slowdown in India is not only cyclical but also struc-
tural. The unhealthy public finances of the country pre-
vent fiscal policy from being eased to boost growth. In
fact, the weaker INR from the beginning of the year has
further increased the fuel subsidy bill and hence public
expenditure, as import prices have surged. Deficit and
debt as a percentage of GDP are approaching the levels Public finances to deteriorate additionally
seen in southern Europe. Standard & Poors and Fitch al-
ready cut their outlook for India to negative. With par-
liamentary election scheduled for 2014 and the weak po-
sition of the current government, it seems likely that it
will maintain stability at the expense of reforms in retail
industries and a reduction of fuel subsidies.

Regardless of the recent decline in the economy, we con-
tinue to take a positive view on India’s long-term growth.
This is primarily based on the favourable demographics
and large pool of available labour.

Amy Yuan Zhuang

India: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (INRbn) 2010 2011 2012E 2013E 2014E
Fixed investment 20,418 -16.8 5.5 5.5 8.0 9.8
Exports 13,000 15.6 18.5 9.5 12.0 16.0
Imports 16,469 9.6 9.5 12.0 13.0 15.0
GDP 9.6 6.9 6.0 6.7 7.2
Nominal GDP (INRbn) 64,574 76,741 88,558 100,071 113,080 128,911

Wholesale prices, % y/y 9.6 9.5 7.5 6.8 7.0


■ Brazil

Slow BRIC healing
The economy has disappointed in the first half of this Growth stabilising
year with industrial production again dragging down
growth. It seems, however, that the worst is behind us
and even though manufacturing indices are still reflecting
contraction, recent activity and business confidence read-
ings show improvement. The government announced a
number of supply-side initiatives to support industry, in-
cluding an increase in public infrastructure spending and
concessions to the private sector as well as lower energy
and payroll tariffs. Private sector demand remains sup-
ported by a continuous decline in unemployment, and re-
tail sales have rebounded strongly over the past few
months helped also by a reduction in credit rates and tax-
es. This supports our expectation that GDP growth will
move back above 4% y/y by Q4 this year.
Policy easing cycle nearing the end
The central bank of Brazil continued its aggressive
monetary policy easing this year, cutting the benchmark
SELIC rate from the peak of 12.5% last year to 7.50%
currently. With signs of improved economic momentum
and more optimistic policymakers, we believe the easing
cycle has ended, with the risk tilted towards just one
more rate cut. After having approached the central bank’s
target (4.5%) earlier this year, inflation has begun to ac-
celerate again. This trend will likely continue and even-
tually force policymakers to start tightening in late 2013.

The Brazilian central bank chose to tolerate further BRL
weakness early this year, allowing the USD/BRL to
weaken to the 2.00 level which the markets have per- More balanced capital inflows
ceived as the bank’s comfort zone (judging from inter-
vention patterns). We expect gradual BRL strengthening
going forward, supported by commodity prices and the
end to the policy easing cycle. Notably, policymakers
have achieved a rebalancing of capital inflows because
over the past years as portfolio inflows have declined, the
more stable foreign direct investment flows have grown.
This should help prevent disorderly BRL moves when
global capital flows shift.

Aurelija Augulytė
aurelija.augulyte@nordea.com +45 3333 6437

Brazil: Macroeconomic indicators (% annual real changes unless otherwise noted)
2009 (BRLbn) 2010 2011 2012E 2013E 2014E
Private consumption 1,979.8 7.0 4.5 4.3 4.8 5.5
Government consumption 687.0 4.0 3.0 3.2 3.0 3.0
Gross fixed capital formation 585.3 22.0 6.0 3.0 6.5 7.4
Exports 355.7 11.5 8.5 6.6 7.0 8.0
Imports 360.8 36.3 12.8 6.9 7.2 9.0
GDP 7.6 2.8 2.6 4.6 4.8
Nominal GDP (BRLbn) 3,239.4 3,721.5 3,825.7 3,925.2 4,105.7 4,302.8



■ Oil

Oil prices stay high but spare capacity buffer should build
Oil prices are expected to remain high over the forecast Oil price forecasts Brent – baseline (USD/barrel)
period as the market will remain tight by historical stand- Q1 Q2 Q3 Q4 Year
ards. Supply additions are expected to outpace demand 2011 106 115 112 110 111
growth resulting in slightly softer oil balances in 2013. 2012E 118 109 112 109 112
The market will remain similarly tight in 2014 as supply 2013E 108 110 112 114 111
growth slows and demand accelerates with the global 2014E 114 114 116 116 115
Source: Nordea Markets
economy. Oil prices will likely remain volatile around
high levels given the market tightness and risks to sup- Supply growth to outpace demand growth
ply.

Income growth, economic activity and population growth
are vital drivers of oil demand. Global oil demand is ex-
pected to increase at a higher pace in 2013-14 than in the
prior two years as economic growth picks up. OECD
demand will continue to decline owing to efficiency
gains, fuel switching and subdued economic growth.
Non-OECD countries contribute to all oil demand
growth, which averages 1.1mb/d over 2013-14. Structur-
ally higher economic growth, rising income and popula-
tion growth in emerging economies is expected to out-
weigh efficiency gains in oil use and switch to other en-
ergy sources. Demand for transportation is expected to
remain the primary driver of global oil use, accounting OPEC spare capacity to increase from low levels
for around 52% of total oil demand.

Global oil supply is expected to grow in the forecast pe-
riod mainly driven by a healthy expansion of oil produc-
tion capacity in North America, Iraq, Brazil and OPEC
NGLs. Non-OPEC is expected to account for the lion’s
share of new capacity brought online. We expect the past
few years’ impressive growth in US shale oil/tight oil
and Canadian oil sands production to continue, although
infrastructure and environmental issues may restrain fu-
ture advances. In Brazil local content requirements and
cost inflations could continue to challenge the country’s
expansion plans. We only foresee a slight resumption of
the oil production in Libya, Yemen and Sudan/South Su- Oil price baseline, high and low risk scenarios
dan in the forecast period after political unrest has cut oil
production in total by around 1 mb/d. OPEC capacity is
expected to increase in the forecast period. Capacity ex-
pansions in Iraq, Angola, United Arab Emirates and the
return of Libyan oil are expected to outmatch the natural
production /sanctions related declines in Iran and smaller
declines in Nigeria and Venezuela. How long Iran could
stand the EU/US imposed sanctions is uncertain. We ex-
pect production to gradually resume in late 2013, but the
political situation could take a twist for the better or
worse before/after this time. Political unrest and un-
planned production outages are expected to leave global
oil supply at risk.

Bjørnar Tonhaugen
bjornar.tonhaugen@nordea.com +47 2248 7959

Thina M. Saltvedt
thina.margrethe.saltvedt@nordea.com +47 2248 7993


■ Metals

Metal prices scratching the bottom for now
Base metals prices have trended lower since March as the Base metal price forecasts (USD per tonne)
economic slowdown gathered pace driven by Euro-zone 2012E 2013E 2014E
woes. China’s demand for metals has slowed, but a grad- Aluminium 1,967 2,225 2,450
ual pick-up in the country that consumes 40% of the Copper 7,865 8,025 7,950
Nickel 17,463 18,625 19,750
world’s industrial metals output is expected already in
Zinc 1,926 2,100 2,300
the latter part of this year as infrastructure projects are Source: Nordea Markets
fast-tracked to support growth. Long-term prospects for
metals demand are robust despite the current slowdown, Base metals prices
leaving pressure on supply to continue expanding. Metals
markets are expected to tighten gradually and prices to
rise from the current low levels compared to costs.

Aluminium producers are experiencing the second-worst
year since 1982 as low prices have persisted longer than
expected. The current situation is unsustainable in the
medium term and further capacity cuts are expected.
Demand outside Europe and Japan is expected to grow
robustly as aluminium continues to win market share due
to its flexible uses and cost-competitiveness. The project
pipeline in the World ex China is practically dry beyond
2013, while Chinese capacity expands strongly. Low
prices will persist for longer than previously expected be- Copper and aluminium forecast
fore they realign with industry costs at higher levels.

Copper supply is improving and the outlook for supply
over the forecast period looks better than in a long time.
Demand is expected to recover over the forecast period,
led by China, and keep pressure on copper suppliers to
deliver according to plans. An increasing share of copper
supply will come from new projects (greenfields) espe-
cially in 2014, leaving the likelihood for disruptions
high. Copper prices are expected to remain high and
firmly above the long-term incentive price of USD 6,500
per tonne, thus underpinning greenfield projects.

Nickel prices continue to underperform on expectations
of steady supply additions. The market is expected to re- Nickel and zinc forecast
main in surplus over the forecast period, leading to in-
ventory build-ups despite a gradual recovery in demand.
Supply from the new generation of nickel production
(HPAL) has been mixed, but is expected to contribute to
a larger share of total supply, but with risks of delays and
technical setbacks. Nickel prices are expected to increase
from current levels which are considered too low com-
pared to production costs in the long run.

The zinc market will remain in surplus in the first part of
the forecast period, but a gradual tightening of the market
is expected to commence in 2014 as a number of old
mines approach the end of their life. The currently de-
pressed zinc prices are expected to recover gradually be-
fore higher prices are required to balance supply and de-
mand in the latter part of the forecast horizon.

Bjørnar Tonhaugen
bjornar.tonhaugen@nordea.com +47 2248 7959


■ Risk scenario 1

Back on track
With plenty of negative headlines and few signs of the Scenario forecast
Great Recession loosening its grip, it is easy to succumb 2011 2012E 2013E 2014E

to gloom and doom. Sometimes though, the darkest hour World GDP growth % 3.8 3.2 4.1 4.9
- USA 1.8 2.2 2.8 3.4
is just before the dawn. In this scenario we try to high- - Euro-zone 1.5 -0.6 1.2 2.7
light a few events which could help create a growth sur- - China 10.5 8.2 8.6 9.0
prise. Global Inflation (CPI) % 4.1 2.6 3.1 2.9
- US 3.1 2.3 2.8 1.9
The German Constitutional Court rules that the ESM is - Euro-zone 2.7 2.4 2.8 3.1

not in violation of German law and at the same time Eu- - China 5.4 3.1 3.8 4.0
Unemployment %
ropean officials fast-track the creation of the common - US 9.0 8.1 7.3 6.4
banking supervisor, which comes into action before the - Euro-zone 10.2 11.4 11.7 11.0
end of the year. The ESM comes into action and immedi- - China 4.1 4.1 4.0 3.9
ately starts to replenish bank capital directly and to buy Budget deficits %
bond issuances of peripheral Euro-zone countries. - US -8.6 -6.0 -4.2 -3.5
- Euro-zone -4.1 -3.5 -2.1 -0.9
- China -1.1 -2.6 -2.2 -2.2
• In the US, the fiscal cliff is avoided as a political Financial indicators
solution is found that prolongs the current tax cuts - US 3M LIBOR 0.34 0.45 0.85 2.25
for everybody, military spending and entitlements - US 10Y Treasury 2.79 1.80 2.70 3.90
are cut slightly and work on medium-term balancing - EZ 3M Euribor 1.39 0.66 0.50 1.60
of US finances resume. - DE 10Y Bund 2.65 1.55 1.85 2.60

• Chinese officials loosen fiscal policy, economic - EUR/USD 1.30 1.22 1.10 1.00
- Brent Oil 111 107 125 125
growth comes slowly back to life in Europe and
China continues its push to grow domestic demand
by expanding health insurance and lowering interest
rates. Growth moves above 8% again.
• Massive pressure from the US, the G20 and the
IMF convinces European politicians that focus needs
to be on balancing structural budgets over the medi-
um term, allowing fewer tax hikes and few or no
cuts in government spending.
• With the negative feedback loop between banks and
sovereigns in Europe finally broken, businesses and
consumer confidence gets a big boost and business
finally dare to invest again. Consumers loosen their
purse strings slightly.
• Oil demand increases but continued exploration af-
ter shale oil keeps oil prices from moving too high.

Much of the current slowdown can be attributed to the
negative feedback loop from shaky government finances,
worries about the survival of the Euro zone – and simply
fear of what the future has in store.

If governments can finally convince investors and con-
sumers that they are on top of the situation in Europe, in-
vestors might offer governments a bit more time to allow
policies to work, interest rates in peripherals will come
down, worries about sovereign defaults will subside,
businesses will start to invest again and consumers will
be willing to increase consumption. A normal recovery
will start to unfold with an extra boost from low interest
rates and pent-up demand.

steen.grondahl@nordea.com +45 3333 1453


■ Risk scenario 2

That sinking feeling
As European leaders return from their holidays, they are Scenario forecast
once more forced to deal with a deteriorating economic 2011 2012E 2013E 2014E
World GDP growth %
outlook. The situation in Southern Europe is dire but 3.8 2.8 1.6 3.1
- USA 1.8 1.9 0.8 2.7
many other developed economies are holding up reason- - Euro-zone 1.5 -0.7 -2.0 0.0
ably well. That might change. In this scenario we try to - China 10.5 7.4 6.2 6.7
list a few things that can sink growth further. Global Inflation (CPI) % 4.1 2.5 1.6 1.4
- US 3.1 2.0 1.0 1.2

• Northern European countries are sticking to the - Euro-zone 2.7 2.5 2.1 1.2
- China 5.4 3.2 1.7 1.8
Merkel doctrine of hard austerity. At the same time, Unemployment %
voters send clear signals not to allow any more - US 9.0 8.4 9.2 8.7
bailouts. - Euro-zone 10.2 11.4 12.1 12.0
• ECB is unable to intervene in European bond mar- - China 4.1 4.3 5.0 5.6
kets due to stiff opposition from the Bundesbank and Budget deficits %
- US -8.6 -7.2 -6.5 -6.0
likeminded central banks. Their only option is to cut - Euro-zone -4.1 -3.6 -2.8 -2.6
rates to zero, do more LTRO and loosen collateral - China -1.1 -2.8 -3.1 -3.2
demands, but that is about it. Financial indicators
• With continued turmoil in Europe and worries about - US 3M LIBOR 0.34 0.40 0.40 0.60
the fiscal situation in the US, companies freeze on - US 10Y Treasury 2.79 1.70 1.20 1.60
- EZ 3M Euribor
investments and hirings. The uncertainty and the be- 1.39 0.60 0.25 0.25
- DE 10Y Bund 2.65 1.50 0.90 1.20
ginning job losses feed directly into private con- - EUR/USD 1.30 1.22 1.18 1.18
sumption and house prices take another dive exag- - Brent Oil 111 111 82 92
gerating the drop in consumption.
• Oil prices drop below USD 80 a barrel (but averag-
es USD 80 a barrel for the year) which supports dis-
posable income growth especially in the US.
• With major export markets slowing, the Chinese
economy slows during the first half of the year but
more rate cuts from PBoC as well as directed in-
vestments from the Chinese government provides a
gentle lift to Chinese economy in the second half of
the year.
• Flight to safety is in effect with investors fleeing to
the Nordics, Germany, the US and the UK (and se-
lected other countries). Spreads on peripherals widen
further and yield on Spanish and Italian bonds top
8%.

In our downside risk scenario, World GDP is expected to
increase by 1.5%. This might seem high but bear in mind
that from 1982 to 2007, World growth averaged 3.5% –
but also that GDP dropped 0.6% in 2009.

An added cause for worry is that much of the fiscal fire-
power has been spent in the aftermath of the financial
crisis, making it more difficult to arrest the development
should growth take a turn for the worse.

steen.grondahl@nordea.com +45 3333 1453


■ Economic Research Nordea

Economic Research Nordea
Denmark: Sweden:
Annika Winsth, Chief Economist Sweden
Helge J. Pedersen, Global Chief Economist
annika.winsth@nordea.com, tel. +46 8 614 8608
helge.pedersen@nordea.com, tel. +45 3333 3126
Torbjörn Isaksson, Chief Analyst
Johnny Bo Jakobsen, Chief Analyst
torbjorn.isaksson@nordea.com, tel. +46 8 614 8859
johnny.jakobsen@nordea.com, tel. +45 3333 6178
Andreas Jonsson, Senior Analyst
Anders Svendsen, Chief Analyst
andreas.w.jonsson@nordea.com, +46 8 534 910 88
anders.svendsen@nordea.com, tel. +45 3333 3951
Bengt Roström, Senior Analyst
Jan Størup Nielsen, Senior Analyst bengt.rostrom@nordea.com, tel. +46 8 614 8378
jan.storup.nielsen@nordea.com, tel. +45 3333 3171
Linus Lauri, Assistant Analyst
Amy Yuan Zhuang, Senior Analyst linus.lauri@nordea.com, tel. +46 8 614 80 03
amy.yuan.zhuang@nordea.com, tel. +45 3333 5607
Siri Pettersson, Assistant Analyst
Aurelija Augulyte, Analyst siri.pettersson@nordea.com, tel. +46 8 614 80 03
aurelija.augulyte@nordea.com, tel. +45 3333 6437
Georg von Wowern, Assistant Analyst
georg.von.wowern@nordea.com, tel. +45 3333 6102 Estonia:
Henrik Lorin Rasmussen, Assistant Analyst Tönu Palm, Chief Analyst
tonu.palm@nordea.com, tel. +372 628 3345
henrik.l.rasmussen@nordea.com, tel. +45 3333 4007
Daniel Freyr Gustrafsson, Assistant Analyst
Latvia:
daniel.freyr.gustafsson@nordea.com, tel. +45 3333 5115
Andris Strazds, Senior Analyst
andris.strazds@nordea.com, tel. +371 67 096 096
Finland:
Lithuania:
Roger Wessman, Chief Economist Finland
Zygimantas Mauricas, Analyst
roger.wessman@nordea.com, tel. +358 9 165 59930 zygimantas.mauricas@nordea.com, +370 5 2657 198
Pasi Sorjonen, Senior Analyst
pasi.sorjonen@nordea.com, tel. +358 9 1655 9942 Russia:
Annika Lindblad, Analyst Dmitry A. Savchenko, Analyst
annika.lindblad@nordea.com, tel. +358 9 1655 9940 dmitry.savchenko@nordea.ru, +7 495 777 34 77 4194

Dmitry S. Fedenkov, Analyst
dmitry.fedenkov@nordea.ru, +7 495 777 34 77 3368
Norway:
Steinar Juel, Chief Economist Norway Poland:
steinar.juel@nordea.com, tel. +47 2248 6130 Piotr Bujak, Chief Economist Poland
Erik Bruce, Chief Analyst piotr.bujak@nordea.com, +48 22 521 36 51

erik.bruce@nordea.com, tel. +47 2248 4449
Thina M. Saltvedt, Senior Analyst
thina.margrethe.saltvedt@nordea.com, tel. +47 2248 7993
Katrine Godding Boye, Senior Analyst
katrine.godding.boye@nordea.com, tel. +47 2248 7977
Bjørnar Tonhaugen, Senior Analyst
bjornar.tonhaugen@nordea.com, tel. +47 2248 7959


■ Economic Research Nordea

Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S.

The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the cur-
rent views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks
related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient.

The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale
of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient.
Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of fu-
ture results.

Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.

This document may not be reproduced, distributed or published for any purpose without
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