Correction - Nordic Outlook: Continued global r...

The global recovery will continue, helped by the underlying power of the
emerging market economies, low interest rates in the Western world and
optimistic, profitable companies. Cautious economic policy tightening in
emerging market economies will lay the groundwork for a soft landing, while in
the OECD countries the recovery has become sufficiently self-sustaining to
withstand the challenges created by the disaster in Japan, unrest in the Middle
East/North Africa and high prices for energy and other commodities. GDP growth
in the OECD countries will reach 2.4 per cent this year and 3.1 per cent in
2012: a slight downward revision of our previous forecast for this year, but an
upgrading of the growth prospects for 2012. Due to falling commodity prices and
low cost pressure, inflation will fall next year despite rising resource
utilisation and will reach normal levels in such countries as Germany, Sweden
and Norway.

Although the recovery is progressing, it is following the pattern from the
aftermath of previous financial crises. The pace of the upturn is relatively
slow, and reversals easily occur when the economic and financial immune system
is weak. Sovereign debts that are growing above 100 per cent of GDP in the
Western world imply future risks. Global imbalances are also showing worrisome
signs of beginning to grow again, in the shadow of a G20 that appears to be
losing its crisis-driven reform momentum under the French chairmanship.

The European debt crisis has changed shape, from acute liquidity crises and
rapid emergency responses to a focus on the sustainable payment capacity of
countries and the long-term objectives of the European project. The expected
third wave of the crisis has thus washed over the euro zone. This is occurring
at the same time as economic divergences are widening in the euro zone and the
German economy is gaining further ground, with unemployment falling below 5.5
per cent. However, this does not help Greece, which has now reached a situation
where we believe that the level of sovereign debt and the country's external
position will make a debt restructuring in 2012 unavoidable. In our assessment,
Greek sovereign debt will be written down by 50 per cent (slightly less than
market value) for the portion held by the private sector and the European
Central Bank (ECB), among others. New Greek bonds will then be guaranteed
collectively by the other euro zone countries, which means that Europe will have
created its own "Brady bonds". A new emergency loan to Greece will include
recapitalisation funds for Greek banks. After the restructuring, which will also
include privatisation of state-owned property, public sector debt in Greece will
fall from about 150 per cent of GDP today to 80 per cent. We believe that the
direct economic impact of Greece's debt write-down will be manageable and that
the restructuring can be managed within the framework of existing emergency
mechanisms. Yet there will be major strains and risks, and the political
consequences - especially related to secondary effects on Portugal and Ireland -
are difficult to assess. It is increasingly obvious that there is a widening gap
between the voters and their representatives about how the euro zone crisis can
be resolved in the long term.

We are adhering to a relaxed view of inflation. We expect inflation to decline
around the end of 2011 when the commodity effect fades. Underlying price
pressure remains relatively weak. While resource utilisation in Europe is
showing large variations, it is still very low in the United States. Because of
earlier monetary expansion, inflation expectations will be especially important
for central banks to monitor. We believe these expectations will remain stable,
however, allowing central banks to proceed relatively cautiously, normalising
their key interest rates step by step. The ECB will hike its key interest rate
two more times this year and four times in 2012; its refi rate will stand at
1.75 per cent in December 2011 and 2.75 per cent in December 2012. The US
Federal Reserve will leave its key rate unchanged until early 2012. When the Fed
ends its quantitative easing (QE2) programme in June, we do not expect this to
have any lasting impact on the interest rate or liquidity situation.

The US economy is benefiting from an improved labour market and expansive
capital spending. We thus expect the deceleration of early 2011 to be temporary.
We also believe that US fiscal policy is in the process of shifting towards a
more responsible direction after the increased focus of recent weeks on the
sustainability of federal finances. Congress will take advantage of the
opportunities created by heightened crisis awareness to produce a plan,
supported by legislation, that will slow the increase in federal debt. Failure
to do so might have major consequences for the interest rate and foreign
exchange markets late in 2011 and next year.

The Swedish economy is decelerating, but from high growth levels. GDP will
increase by 4.7 per cent in 2011 and 2.6 per cent in 2012 (3.0 per cent
corrected for working days in 2012). The export sector is continuing to show its
strength and is coping well with the pressure of a stronger krona. The effects
of higher interest rates are beginning to be noticeable in the form of slowdowns
in both credit growth and home prices. The expansion in retail sales has also
cooled, but we believe there will be continued fairly strong growth in
consumption over the next couple of years. We expect a decline in registered
unemployment to 6 per cent by the end of 2012: a level that is probably somewhat
below equilibrium. Available indicators, such as labour shortages and the
relationship between unemployment and job vacancies, hardly supports the belief
that the equilibrium unemployment level has recently declined clearly.

Given an increasingly strained resource situation, Sweden's Riksbank will
continue to normalise its key interest rate. Rising underlying inflation
pressure towards the end of 2012 and inflation expectations above 2 per cent in
a two- and five-year perspective also make continued key rate normalisation
likely. We expect the Riksbank to raise its repo rate at every monetary policy
meeting during 2011, bringing it to 2.75 per cent by year-end and 3.75 per cent
by the end of 2012. A widening of short-term interest rate spreads will cause
the krona to appreciate to 8.50 per euro. Swedish government finances are
continuing to improve faster than expected. Together with low sovereign debt,
this will allow room for further fiscal stimulus measures. We expect proposals
equivalent to another SEK 5-10 million to be unveiled in the September budget
bill, bringing the year's dose of fiscal stimulus initiatives to nearly 1 per
cent of GDP. The change in the policy mix towards more expansionary fiscal
policy and tighter monetary policy that we have discussed in recent issues of
Nordic Outlook will thus continue.

The other Nordic countries show strong economic fundamentals but more modest
growth figures than Sweden. In Norway, growth will slow due to a tight labour
market, a strong currency and rising interest rates. After a pause of about one
year, Norges Bank has now resumed its key interest rate hikes. We expect the
deposit rate to be increased gradually to 4 per cent towards the end of 2012 as
a consequence of the tight resource situation and gradually rising core
inflation. The Danish economy will grow by around 2 1/2 per cent. Household
consumption is being held back by high indebtedness, low pay increases and tight
fiscal policy. In Finland, the euro zone country hardest hit by the crisis,
exports and capital spending will contribute to GDP growth of 3.5 per cent in
2011 and 3.0 per cent in 2012.

The gradual recovery of the Baltic economies is continuing. Exports remain a
major driving force, while domestic demand is slowly recuperating after the
crisis. Growth will be 4-5 per cent annually over the next couple of years, led
by Estonia with 5 per cent in 2011. We have made a slight downward adjustment in
our forecast for Latvia. Inflation impulses have primarily been external, and a
severe inflation surge similar to the overheating of 2005-2007 is unlikely. On
the whole, Baltic fhainancial imbalances have decreased significantly, but major
structural problems in the labour market as well as budget deficits in Latvia
and Lithuania pose continued challenges.

Key figures: International and Swedish economy
+---------------------------------------------------+-----+----+----+----+
|International economy. GDP, year-on-year changes, %|2009 |2010|2011|2012|
+---------------------------------------------------+-----+----+----+----+
 United States                                      |-2.6 |2.9 |2.8 |3.8
----------------------------------------------------+-----+----+----+-----
 Euro zone                                          |-4.0 |1.7 |2.2 |2.2
----------------------------------------------------+-----+----+----+-----
 Japan                                              |-6.3 |3.9 |0.5 |2.4
----------------------------------------------------+-----+----+----+-----
 OECD                                               |-3.4 |2.8 |2.4 |3.1
----------------------------------------------------+-----+----+----+-----
 China                                              | 9.2 |10.3|9.3 |8.5
----------------------------------------------------+-----+----+----+-----
 Nordic countries                                   |-4.6 |2.9 |3.3 |2.7
----------------------------------------------------+-----+----+----+-----
 Baltic countries                                   |-15.6|1.2 |4.1 |4.4
----------------------------------------------------+-----+----+----+-----
 The world (purchasing power parities, PPP)         |-0.5 |5.0 |4.3 |4.5
+---------------------------------------------------+-----+----+----+----+
|Swedish economy. Year-on-year changes, %           |2009 |2010|2011|2012|
+---------------------------------------------------+-----+----+----+----+
 GDP, working day corrected                         |-5.2 |5.3 |4.7 |3.0
----------------------------------------------------+-----+----+----+-----
 GDP, actual                                        |-5.3 |5.5 |4.7 |2.6
----------------------------------------------------+-----+----+----+-----
 Unemployment, % (EU definition)                    | 8.3 |8.4 |7.2 |6.3
----------------------------------------------------+-----+----+----+-----
 Consumer Price Index (CPI) inflation               |-0.5 |1.2 |3.3 |2.5
----------------------------------------------------+-----+----+----+-----
 Government net lending (% of GDP)                  |-1.0 |-0.3|0.8 |1.3
----------------------------------------------------+-----+----+----+-----
 Repo rate (December)                               |2.00 |0.25|2.75|3.75
----------------------------------------------------+-----+----+----+-----
 Exchange rate, EUR/SEK (Dec)                       |10.24|8.98|8.70|8.50
----------------------------------------------------+-----+----+----+-----

For further information, please  Press contact
contact                          Elisabeth Lennhede,  Press & PR
                                 +46 70 763 9916
Robert Bergqvist,                [e-mail]
[phone]
Håkan Frisén, [phone]    Ola Kallemur, Group Press Officer
Daniel Bergvall, [phone]  [phone], [phone]
Mattias Bruér, [phone]
Olle Holmgren, [phone]
Mikael Johansson, [phone]
Andreas Johnson, [phone]
Tomas Lindström, [phone]

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SEB is a leading Nordic financial services group. As a relationship bank, SEB in
Sweden and the Baltic countries offers financial advice and a wide range of
financial services. In Denmark, Finland, Norway and Germany the bank's
operations have a strong focus on corporate and investment banking based on a
full-service offering to corporate and institutional clients. The international
nature of SEB's business is reflected in its presence in some 20 countries
worldwide. On 31 March 2011, the Group's total assets amounted to SEK 2,118
billion while its assets under management totalled SEK 1,372 billion. The Group
has about 17,000 employees. Read more about SEB at www.sebgroup.com.




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http://hugin.info/1208/R/1516451/452754.pdf

Nordic Outlook: 


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