New Nordic Outlook: Deeper recession - despite ...

The most acute phase of the financial crisis is probably past, but
the situation remains strained. The crisis is now having very potent
contagious effects on the real economy. The world economic downturn
is becoming more and more synchronised. Gross Domestic Product in the
OECD countries will fall by more than 1 per cent in 2009 - the
weakest performance since the Second World War. Meanwhile powerful,
synchronised global stimulus policies are taking shape. Interest
rates are being cut significantly as the threat scenarios of central
banks are increasingly dominated by recession, financial crisis and
deflation worries. In addition, fiscal policy is being used on a
broad front to soften the downturn. Stimulus packages will contribute
to a slight recovery in 2010, a year that will still be dominated by
the economic slump.


The downturn in the Swedish economy is continuing at a rapid pace.
Next year GDP will fall by 1.3 per cent, and economic weakness will
persist in 2010. The recession will have a growing impact on the
labour market. The job market will shrink by nearly 150,000 people
altogether, and unemployment will climb to nearly 10 per cent by the
end of 2010. The Riksbank will cut its repo rate at least to 1.50 per
cent next summer. The government will implement additional fiscal
stimulus packages, and by 2010 Sweden's annual surpluses in public
sector finances will have turned into a deficit equivalent to 3.5 per
cent of GDP.

The consolidation of the global credit market will dominate economic
developments in the next couple of years. The global economy will
suffer on a broad front from tighter lending practices, falling asset
prices, increased saving and reduced risk-taking. The United States
will undergo one of its deepest recession in modern times.
Unemployment will climb to 9 per cent. Lower resource utilisation
will squeeze wages and prices. We expect a sharply declining Consumer
Price Index for a while, and the battle against unemployment and
falling prices will be the most important economic policy tasks. The
Federal Reserve will cut its key interest rate one more time to 0.50
per cent before the end of 2008 and maintain this rate during both
2009 and 2010. The new Barack Obama administration will launch a
large stimulus package, which will help soften the downward economic
spiral, but this policy will meanwhile lead to major strains in
public sector finances.

Economic developments in Western Europe are closely following
American trends. Higher household savings and balanced foreign trade
points towards somewhat greater resilience than in the US, but on the
other hand, home prices in many European countries are at least as
excessive as in the US. Economic stimulus measures will also be less
aggressive in Europe. The European Central Bank will continue cutting
its refi rate, which will reach 1 per cent next autumn.

Having rebounded, the US dollar will maintain its strength for the
next six months in an environment of weak risk appetite and
de-leveraging. After that, underlying forces will gain the upper hand
and the euro will rebound to USD 1.40 by the end of 2010. Bond yields
will fall further, in the wake of sluggish growth and lower key
interest rates. German ten-year government bond yields will bottom
out at 2.7 per cent next summer and American ones will dip even
lower. After that, long-term yields will turn slightly upward, among
other things because of very large central government borrowing
requirements in many countries.

The Swedish economy will follow the downward path of the synchronised
international recession. Next year GDP will fall by 1.3 per cent,
adjusted for work days, and 2010 will be another weak year. Average
annual growth will be 0.2 per cent in 2008-2010, or significantly
weaker than during the slowdown just after the millennium shift, but
substantially better than during the crisis of the early 1990s. The
labour market downturn has accelerated in recent months, and
unemployment is clearly on the way up. Calculated as annual averages,
the jobless rate will climb from 6.2 per cent this year to 9.4 per
cent in 2010.

Inflation has peaked and will fall sharply in the near future. As
early as this coming spring, inflation will be below the Riksbank's
target. A combination of recession and financial stress will help
persuade the Riksbank to continue cutting its key interest rate at a
rapid pace. By next summer the repo rate will be 1.50 per cent. The
Swedish krona will continue to weaken for another while, but then it
will recover as the financial situation gradually normalises.

The role of fiscal stimulus in stabilisation policy will become
increasingly important in a situation characterised by a deep
economic downturn and tighter credit. We expect further stimulus
packages in Sweden equivalent to SEK 50 billion. This, combined with
weak economic conditions, will lead to a rapid deterioration of
public sector finances. The government will now face a difficult
balancing act when it comes to interpreting the official budget
target. We will probably see an adjustment to less ambitious budget
targets in a slightly longer perspective.
Key figures, Swedish economy
Year-on-year percentage change


+------------------------------------------------------------------+
|                                    | 2007 | 2008  | 2009  | 2010 |
|------------------------------------+------+-------+-------+------|
| GDP, adjusted for work days        | 2.9  | 0.8   | -1.3  | 0.6  |
|------------------------------------+------+-------+-------+------|
| GDP, actual                        | 2.7  | 1.1   | -1.4  | 0.9  |
|------------------------------------+------+-------+-------+------|
| Unemployment (%, ILO definition)   | 6.2  | 6.2   | 7.9   | 9.4  |
|------------------------------------+------+-------+-------+------|
| CPI inflation                      | 2.2  | 3.6   | 1.2   | 0.9  |
|------------------------------------+------+-------+-------+------|
| Public financial saving (% of GDP) | 3.5  | 2.6   | -1.3  | -3.5 |
|------------------------------------+------+-------+-------+------|
| Repo rate (December)               | 4.00 | 3.00  | 1.50  | 1.50 |
|------------------------------------+------+-------+-------+------|
| Exchange rate, EUR/SEK (December)  | 9.43 | 10.30 | 10.10 | 9.50 |
+------------------------------------------------------------------+


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
another ten countries. On 30 September 2008, the Group's total assets
amounted to SEK 2,416bn (~EUR 237bn) while its assets under
management totalled SEK 1,244bn (~EUR 122bn).The Group has about
22,000 employees. Read more about SEB at www.sebgroup.com.

_____________________________________________
For further information, please contact:
Robert Bergqvist, telephone [phone]
Håkan Frisén, [phone]
Mattias Bruer, [phone]
Bo Enegren, [phone]
Mikael Johansson, [phone]
Tomas Lindström, [phone]
Press contact: Elisabeth Lennhede, [phone],
[e-mail]


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