Nordic economies to remain ‘strong’, says Nordea
The Nordic region’s economies look set to remain among the world’s strongest, according to the latest economic outlook from European top-10 universal bank Nordea.
Helge Pedersen, global chief economist at the bank, said that Sweden and Norway were the strongest regional economies, followed by Finland and then Denmark.
Sweden’s GDP grew a record 5.5% in 2010, and Pedersen sees the main threat in rising interest rates, necessary to dampen an economy in which more people are registered as working than ever before. Wage and energy price rises will force the country’s central bank, Riksbank, to continue raising its rates.
Norway’s growth is deemed “fairly strong”, with a slight threat of inflation coming from consumption. Again, this is tied to a readjustment downwards in the forecast unemployment rate, which Pedersen says should lead to stronger consumption, and retailers ultimately passing on costs to consumers. Norges Bank, the central bank, will hike rates more aggressively than the ECB, Pedersen said.
Finland’s economy remains strong, driven by exports to key trading partners such as Germany, Sweden and Russia. The utilisation rate of industrial capacity is rising, which in turn will spur growth in investment. However, inflation is likely to rise here too, moderating consumption even as employment grows.
Denmark is seen as the weakest of the four economies. It suffered negative growth in the last quarter of 2010, but Pedersen believes it is on the right track to achieve growth sufficient to boost employment. The country also faces a general election in November this year.
Alongside Pedersen’s report, Nordea has also issued an in-depth view of the direction of the Swedish economy as the country’s monetary policy tightens.
Bottlenecks in resources are appearing because of the continued growth and the record number in employment.Nordea chief economist Annika Winsth said that there were good reasons for the Riksbank to raise interest rates in the near future. The repo rate will hit 2.5% by the end of this year and 3.25% by the end of 2012, Nordea suggests.
“Nordea expects household credit growth to slow down as the Riksbank raises rates, and that housing prices will stabilise,” said Annika Winsth.
Households are an important piece of the puzzle, where postive growth in disposable incomes points to strong consumption at the same time that savings increase. Households sensitivity to interest rates will be decisive for the direction of future consumption.
Despite the strong local currency, the krona, demand for Swedish exports remain strong, mostly because of rapid expansion in emerging markets.
“Swedish exports to the BRIC countries are now greater than to the US,” said Annika Winsth.
|Sweden, key figures||2009||2010||2011||2012|
|Inflation % annualised||-0,5||1,2||3,2||3,0|
|Government savings, % of GDP||-0,9||-0,3||1,0||1,7|