Nordic Outlook: Fiscal and monetary shock thera...

In the wake of the financial crisis, a dramatic weakening of economic
activity is occurring. This decline is global and synchronised.
Global GDP will shrink this year, and 2010 will be another typical
year of economic weakness. The consequences will be rapidly rising
unemployment and mounting tensions in international economic policy
cooperation. The threat of deflation will become increasingly evident
to the world's central banks, which will respond with zero interest
rate policies and quantitative stimulus measures. Highly expansive
fiscal policies will soften the downturn, but meanwhile public sector
deficits will be driven up to high levels. A stabilisation of output
and the global credit market situation will occur towards year-end,
but the recovery will be sluggish.


The Swedish economy hit a wall late in 2008 as world trade collapsed.
In 2009 GDP will fall by nearly 2¿ per cent - the largest downturn in
a single year since the Second World War. The economic downturn will
persist during 2010 and growth will end up around zero. The labour
market will deteriorate and payrolls will shrink by a total of more
than 200,000 people. Inflation will ease noticeably. This year the
Consumer Price Index will fall by more than ¿ per cent. Due to a
clear deceleration in the rate of pay increases, inflation will
remain far below the Riksbank's target at the end of 2010. Combined
with continued downside risks to growth, this will lead the Riksbank
to go the full distance and cut its repo rate to zero per cent.
Sweden's public sector finances will deteriorate at a rapid pace, and
the 2010 budget deficit will be equivalent to 6 per cent of GDP.

The United States will experience its deepest post-war recession. The
economy is now going through a sharp savings adjustment, and GDP will
fall 2.6 per cent this year. In 2010, too, growth will be far below
trend. The upturn in unemployment to more than 10 per cent will be
the most dramatic in modern times. Meanwhile the government is
launching unprecedented economic stimuli. Zero interest rates,
combined with various types of quantitative stimulus measures, are
being used in response to the threat of deflation and the difficult
credit market situation. Fiscal policy will also be extremely
expansive, with stimuli equivalent to 6 per cent of GDP in the next
couple of years.

Economic conditions in Western Europe have weakened greatly in recent
months, and growth will end up on a par with the US level this year.
Delayed policy responses and major imbalances in the housing market
in many countries will contribute to this. Large exposure to
crisis-plagued Central and Eastern Europe is also weighing down the
region. Because of the weak growth outlook and sharply falling
inflation, the European Central Bank will also cut its key interest
rate to 0.5 per cent.

Emerging economies such as China, India and Russia are also being
affected as demand from the US and Western Europe falls and the flow
of credit dries up. This year, overall GDP growth in countries
outside the OECD will be only 1 per cent, compared to the record year
2007 when growth exceeded 8 per cent.

During 2009 the foreign exchange market will focus on the problems in
the euro zone, and the euro will continue to weaken towards USD 1.15
late this year. Key interest rates of close to zero and a continued
flow of weak economic data will help push down long-term yields
during 2009. Ever-larger public sector borrowing requirements will
gradually have an impact on market interest rates, which will rebound
during 2010.

The Swedish economy will decline by about the same as the rest of
Europe. This year GDP will shrink by 2.4 per cent, and growth will
reach only 0.4 per cent in 2010. The labour is facing a clear
adjustment. Unemployment will climb to an average of more than 10 per
cent in 2010. The dramatic weakening of the labour market will
squeeze wages and salaries. This will help keep underlying inflation
pressure very weak, and inflation will end up well below the
Riksbank's target at the end of next year. With inflation risks on
the downside and a very weak economic situation, the Riksbank can
continue helping the economy with interest rate cuts. As early as
this spring, the repo rate will stand at zero per cent.

The Swedish government will implement further fiscal stimulus
measures next year. Combined with the effects of the economic slump,
this will greatly weaken public finances. The public sector's
financial saving will move from a surplus of 2 per cent of GDP in
2008 to a deficit equivalent to 6 per cent in 2010. Central
government debt will start to climb, after shrinking almost
uninterruptedly since the mid-1990s.

Key figures, Swedish economy
Year-on-year percentage change


+------------------------------------------------------------------+
|                                    | 2007 | 2008  | 2009  | 2010 |
|------------------------------------+------+-------+-------+------|
| GDP, adjusted for work days        | 2.7  | 0.3   | -2.3  | 0.1  |
|------------------------------------+------+-------+-------+------|
| GDP, actual                        | 2.5  | 0.6   | -2.4  | 0.4  |
|------------------------------------+------+-------+-------+------|
| Unemployment (%, ILO definition)   | 6.2  | 6.2   | 8.6   | 10.2 |
|------------------------------------+------+-------+-------+------|
| CPI inflation                      | 2.2  | 3.4   | -0.7  | 0.4  |
|------------------------------------+------+-------+-------+------|
| Public financial saving (% of GDP) | 3.7  | 2.2   | -2.5  | -6.0 |
|------------------------------------+------+-------+-------+------|
| Repo rate (December)               | 4.00 | 2.00  | 0.00  | 0.00 |
|------------------------------------+------+-------+-------+------|
| Exchange rate, EUR/SEK (December)  | 9.43 | 10.92 | 10.00 | 9.75 |
+------------------------------------------------------------------+


SEB is a North European financial group serving some 400,000
corporate customers and institutions and five million private
individuals. SEB offers universal banking services in Sweden, Germany
and the Baltic countries - Estonia, Latvia and Lithuania. It also has
local presence in the other Nordic countries, Poland, Ukraine and
Russia and a global presence through its international network in
major financial centers. On 31 December 2008, the Group's total
assets amounted to SEK 2,511bn (~EUR 230bn) while its assets under
management totalled SEK 1,201bn (~EUR 110bn).The Group has about
22,000 employees. Read more about SEB at www.sebgroup.com.

____________________________________________
For further information, please contact:
Robert Bergqvist, [phone]
Håkan Frisén, [phone]
Mattias Bruér, [phone]
Bo Enegren, [phone]
Mikael Johansson, [phone]
Tomas Lindström, [phone]
Elisabeth Lennhede, Press & PR, [phone],
[e-mail]


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