Nordic Outlook: No smooth recovery

In many respects, the global economic recovery has strengthened in recent
months. Crisis policies have fulfilled their task: stabilising economic and
financial systems. But now that the world is permitted to lift its gaze, not
unexpectedly there are mounting worries about how government finances will be
restored to an even keel quickly enough, and how changes in the global credit
market will affect access to capital and cost of capital. Our conclusion is the
same as previously: growth will be hampered. We expect GDP in the OECD countries
to grow at close to trend levels in 2010-2011, which will suffice in order to
stabilise the job market in many countries. Yet there is a great risk that
unemployment will get stuck at higher levels.

China will remain a driving force in the world economy. The country will
admittedly need to tighten its credit market in order to counteract bubble
tendencies in asset prices, but there is hardly any danger of inflation and
overheating. China has the tools to dodge imbalances and will thus serve as a
stabilising force for its region and for the world.

Generally speaking, the risk of inflation in the world economy is small. Since
fiscal policies must be tightened and the credit situation is expected to be
tough, interest rate policy will remain gentle in many countries; the US Federal
Reserve (Fed) and the European Central Bank (ECB) will not hike their key
interest rates until around the end of 2010. In the euro zone, collaboration is
being thoroughly tested in an environment of high unemployment, where a number
of countries no longer have access to effective economic policy instruments. The
euro will continue to weaken.

Sweden stands well equipped when other countries are forced to undergo
restoration of sound central government finances. In some respects, we can thank
the lessons and the methods used to combat the 1990s economic crisis for this
situation. GDP growth will be 3.1 per cent in 2010 and 2.7 per cent in 2011 (2.8
and 2.7, respectively, in calendar-adjusted terms). Household consumption
capacity will benefit from fiscal expansion (SEK 15 billion more in the 2011
government budget), great sensitivity to interest rates and unusually high
savings. In addition, Sweden's industrial structure should prove to be an
advantage during the international recovery phase. Unemployment will peak at
9.5 per cent during the second quarter of 2010, half a percentage point lower
than our November forecast. Collective pay agreements will end up at around 2
per cent for the year and pose no threat to inflation; productivity will
rebound. The Riksbank will raise its repo rate during the second half of 2010,
starting in July. The Swedish central bank's key rate will reach 1.5 per cent in
December and 3.0 per cent in December 2011.

"Of course it is hardly news that many countries are caught in a troublesome
fiscal situation," saysRobert Bergqvist, SEB's Chief Economist. "In the case of
various euro zone countries, for example, there is now little room for economic
policy manoeuvring if growth curves should begin pointing downward when
interest, currency and fiscal policy measures are not available. This worries
many financial market players."

"The recovery is surrounded by storm clouds, but there is still growth momentum.
Interest rate policies will remain expansionary as long as there are risks of
reversals, and depressed production levels in manufacturing represent a
potential for rapid increases," saysHåkan Frisén, SEB's Head of Economic
Research and editor in chief of Nordic Outlook. "Labour market weakening has
been milder than expected. This is encouraging, since it reduces the risks of
long-term damage to the economy. Meanwhile it is likely to take time before we
see unemployment falling to more reasonable levels."

Nordic Outlook is sticking to its assessment that internal and external forces
will affect the global banking/credit systems in a way that will have monetary
policy consequences.

"It is difficult to quantify effects, but it is highly probable that new
financial regulations and requirements will hamper the general credit situation,
through lower supply and higher cost of capital," saysTomas Lindström, monetary
policy analyst at SEB Economic Research. "This, and low core inflation, will
give central banks room to maintain lower key interest rates on average in a
slightly longer perspective. As we know, the Riksbank has now lowered its
forecast of a neutral key interest rate, as foreseen in our assessment last
autumn."

The US economy is under heavy strains, especially from the weak labour market.

"It looks as if there will be strong growth figures in the United States during
2010, but the economy will lose momentum late in the year as inventory effects
and the impact of fiscal stimulus measures fade," saysMattias Bruér, US analyst
at SEB Economic Research. "We expect unemployment to remain stuck at a bit above
9 per cent in 2011. Spare capacity will keep inflation down, and only in
December 2010 will the Fed move its key interest rate cautiously upward."

For the first time in years, SEB is raising itsBaltic GDP forecasts: for Estonia
and Lithuania, where the recession is now expected to end in 2010.

"The worst seems to be over in the Baltic countries. Bottoming-out trends that
we pointed out in our autumn reports strengthened during the winter. Export
prospects have improved further, and Estonian membership of the euro zone in
2011 looks increasingly likely, which is boosting investments. Meanwhile there
is some lingering uncertainty as to whether the three governments will have the
stamina to fully implement their painful belt-tightening policies. This risk
applies especially to Latvia, which is holding an election this coming autumn,"
saysMikael Johansson, Baltic and Eastern European analyst at SEB Economic
Research.

Swedish exports and private consumption may provide upside surprises during
2010-2011, butSweden is of course dependent on continued international economic
growth without reversals.

"The Nordic countries stand out in a positive way when it comes to strong
fundamentals," saysDaniel Bergvall, government finance analyst at SEB Economic
Research. "Swedish central government finances have resisted the recession
surprisingly well. The budget deficit will be less than 2 per cent of GDP in
2010 and 2011, and central government debt will climb to 'only' 36 per cent of
GDP. A change of government after the September 2010 election would not affect
these figures so much in the short term, though we would expect fiscal policy
under a new, more leftist government to have more of a demand-side profile."

Consumer Price Index (CPI) inflation in Sweden is moving upward as a direct
consequence of the disappearance of earlier energy price and interest rate
declines from the 12-month figures. Looking ahead, the Riksbank is expected to
hike its key interest rate. Core inflation, which is somewhat higher than in
many other countries, is nevertheless on its way down. Rising productivity and a
stronger Swedish krona will soften inflation pressure.

"Unlike its peers in most other countries, the Riksbank cannot count on fiscal
policy to be tightened in the next couple of years. We thus expect the bank to
hike its key interest rate in July. The repo rate will stand at 3 per cent late
in 2011 − a higher level than the Fed and ECB key rates, for example," Håkan
Frisén says. "Given a continued rapid increase in lending to households and a
renewed upturn in home prices, the Riksbank will face a dilemma earlier than
many other central banks. It remains to be seen whether the Riksbank, or some
other government agency, will be granted clearer authority to influence
loan-to-value ratios and rates of loan principal repayment."

The Group of 20 economies is continuing to build the "new world economic order"
aimed at achieving more balanced, stable global economic and financial market
performance in the future.

"We believe that the work under way in the G20, backed by the International
Monetary Find, may be of very great importance," says Robert Bergqvist. "When
the G20 'reach their goal' in South Korea late this year, we may have a
completely new way of thinking about both global cooperation and economic policy
benchmarks. This is of course highly interesting to Sweden, given our
international dependence. The final outcome may be something positive, but we
should also have realistic expectations."


Key figures: International and Swedish economy
+--------------------------------------------------+-----+-----+----+----+
|International economy. GDP, year-on-year change, %|2008 |2009 |2010|2011|
+--------------------------------------------------+-----+-----+----+----+
|United States                                     | 0.4 |-2.4 |3.4 |2.2 |
+--------------------------------------------------+-----+-----+----+----+
|Euro zone                                         | 0.5 |-3.9 |1.7 |2.0 |
+--------------------------------------------------+-----+-----+----+----+
|Japan                                             |-1.2 |-5.0 |1.5 |1.8 |
+--------------------------------------------------+-----+-----+----+----+
|OECD countries                                    | 0.6 |-3.5 |2.4 |2.3 |
+--------------------------------------------------+-----+-----+----+----+
|China                                             | 9.6 | 8.7 |10.5|9.0 |
+--------------------------------------------------+-----+-----+----+----+
|Baltic countries                                  |-1.0 |-15.9|-0.1|4.2 |
+--------------------------------------------------+-----+-----+----+----+
|The world (purchasing power parties, PPP)         | 3.0 |-0.7 |4.5 |4.3 |
+--------------------------------------------------+-----+-----+----+----+
|Swedish economy. Year-on-year changes, %          |2008 |2009 |2010|2011|
+--------------------------------------------------+-----+-----+----+----+
|GDP, working day corrected                        |-0.5 |-4.4 |2.8 |2.7 |
+--------------------------------------------------+-----+-----+----+----+
|GDP, actual                                       |-0.2 |-4.5 |3.1 |2.7 |
+--------------------------------------------------+-----+-----+----+----+
|Unemployment, % (EU definition)                   | 6.2 | 8.3 |9.3 |9.2 |
+--------------------------------------------------+-----+-----+----+----+
|Consumer Price Index (CPI) inflation              | 3.4 |-0.3 |1.3 |2.4 |
+--------------------------------------------------+-----+-----+----+----+
|Government net lending (% of GDP)                 | 2.5 |-1.6 |-1.9|-1.9|
+--------------------------------------------------+-----+-----+----+----+
|Repo rate (December)                              |2.00 |0.25 |1.50|3.00|
+--------------------------------------------------+-----+-----+----+----+
|Exchange rate, EUR/SEK (December)                 |10.92|10.24|9.50|9.20|
+--------------------------------------------------+-----+-----+----+----+


SEB is a Northern 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 three Baltic countries −
Estonia, Latvia and Lithuania. It also has a local presence in the other Nordic
countries, Ukraine and Russia and a global presence through its international
network in leading financial centres. On December 31, 2009, the Group's total
assets amounted to SEK 2,308 billion and its assets under management totalled
SEK 1,356 billion. The SEB Group has about 20,000 employees. Read more about SEB
atwww.sebgroup.com <

http://www.sebgroup.com/>.

_____________________________________________
For further information, please contact:
Robert Bergqvist, [phone]
Daniel Bergvall, [phone]
Mattias Bruér, [phone]
Håkan Frisén, [phone]
Olle Holmgren [phone]
Mikael Johansson, [phone]
Tomas Lindström, [phone]
Elisabeth Lennhede, Press & PR, [phone], [e-mail]
<mailto:[e-mail]>



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