Economic Outlook: The litmus test
(Thomson Reuters ONE) - At the threshold of the new decade it is clear that the world economy hasfinally moved out of recession. But in its latest research report, EconomicOutlook, Nordea forecasts a moderate economic upswing that will only graduallygain momentum.- The huge financial sector rescue packages and significant concerted G20 easingof economic policies to kick-start the economies have been highly successful,says Nordea's Global Chief Economist Helge J. Pedersen.Economic growth especially in South-East Asia spearheaded by China has beenstrong, and industrial production in this region is now higher than before thecollapse of Lehman Brothers. In the rest of the world, production has been setback several years despite the increased momentum. Global capacity utilisationremains weak, and this dampens investment needs and worsens the labour marketsituation. It further reduces the likelihood of strong private consumptiongrowth.- So even though the situation has improved, we still basically believe that thecurrent economic upswing will be moderate and only gradually gain momentum. Sofar the upswing in the industrialised countries has been driven by expansionaryeconomic policies and inventory changes, says Helge J. Pedersen.- The coming six months will provide the ultimate litmus test of final demandand especially private consumption, says Helge J. Pedersen.In terms of economic growth 2009 was an annus horribilis for the Danish economy.Now the Danish economy may be in for some years of growth in positive territory.The budding signs of international growth have brightened the prospects forDanish exports, and consumer spending looks set to increase noticeably againthis year after a significant setback in 2009. Income tax cuts and lowerinterest rates will boost households' overall disposable income despite apersistent increase in unemployment in 2010.The Swedish economy deteriorated sharply at the end of 2008 and the beginning of2009, but recovered slowly during the following quarters. Economic growth isexpected to pick up in 2010, mainly driven by private consumption and inventorychanges. Exports, supported by improved global trade, will also contribute tothis increase. Headline inflation is seen picking up in 2010, while coreinflation will decline and remain below the Riksbank's two per cent target. Withstronger growth, an improved labour market and high credit growth, the Riksbankwill likely start raising the repo rate during the year. We expect the repo rateto be two per cent by end 2010.In a historical context the setback in Norway was relatively strong, butcompared to other countries it was fairly mild. In the second and third quarterlast year growth in mainland production moved back into positive territory.Particularly the massive fiscal and monetary policy stimuli got the economygoing again and contribute to growth also in 2010. In 2011 growth in the economymay slow as a result of higher interest rates, fiscal policy tightening and adecline in oil investment. With strong growth throughout 2010, Norges Bank willhike rates further, but in 2011 the pace of monetary tightening will slow.Norwegian interest rates will rise less than the market currently prices in andshould therefore not trigger significant strengthening of the Norwegian krone.The Finnish economy returned to growth in the summer of 2009 after a steepexport-led collapse during the winter. This year exports will rebound in tandemwith world trade and also household demand will recover supported by increasedconsumer confidence. On the whole, in 2010 the Finnish economy should growfaster than the rest of the Euro area. The unemployment rate has so far risenless than feared and it is set to peak in the summer. Finnish public financeswill remain in relatively good shape and the public sector deficit is notexpected to exceed the three per cent limit. Nevertheless, there will bechallenges to overcome if the government is to meet the ambitious medium-termsurplus targets, and this will shape the political debate ahead of the 2011elections.View an interview with Helge J. Pedersen and download the report.
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Datum: 19.01.2010 - 04:03 Uhr
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