Nordic Outlook - Danske Bank · 2014. 6. 25. · Nordic Outlook 4 | 25 June 2014 k Denmark Recovery...

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Investment Research

June 2014

Nordic OutlookEconomic and financial trends

� Denmark: Recovery is here - We have been waiting for a long time but at long last the recovery seems to be taking hold

� Sweden: The uncertainty principle - The Riksbank is set to cut the repo rate and keep it ultra-low for ultra-long

� Norway: Oil investment likely to hurt GDP growth - We expect slower growth due to lower growth in oil but still high levels of activity

� Finland: The third year of decline - The Finnish economy is still trapped in recession but should recover in 2015

2 | 25 June 2014 www.danskeresearch.com

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Analysts

Editorial deadline 24 June 2014 Investment Research

Editor-in-Chief:

Steen Bocian

Chief Economist

+ 45 45 12 85 31

[email protected]

Macro economics:

Las Olsen Denmark +45 45 12 85 36 [email protected]

Mikael Olai Milhøj Denmark +45 45 12 76 07 [email protected]

Mikkel Rud Bjørndal Denmark +45 45 12 81 57 [email protected]

Roger Josefsson Sweden +46 (0)8-568 805 58 [email protected]

Frank Jullum Norway +47 85 40 65 40 [email protected]

Juhana Brotherus Finland +358 (0)10 546 7159 [email protected]

Pasi Petteri Kuoppamäki Finland +358 (0)10 546 7715 [email protected]

This publication can be viewed at www.danskebank.com/danskeresearch

Statistical sources: Datastream, Macrobond Financial, OECD, IMF, National Institute of Social and Economic Research,

Statistics Denmark and other national statistical institutes as well as proprietary calculations.

Important disclosures and certifications are contained from page 39 of this report.

http://www.danskebank.dk/analyse

http://www.danskebank.dk/analyse


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Contents

Denmark Recovery is here 4

Forecast at a glance 10

Sweden The uncertainty principle 11


Norway Oil investment likely to hurt GDP growth 20


Finland The third year of decline 26


Global overview The sky is clearing 34

Economic forecast 37

Financial forecast 38

The Nordic Outlook is a quarterly publication that presents Danske Bank’s view on the economic outlook for

the Nordic countries. The semi-annual publication The Big Picture sets out our global economic outlook.

http://danskeresearch.danskebank.com/link/GlobalScenarios/$file/GlobalScenarios.pdf


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Denmark

Recovery is here

We have been waiting for a long time but, at long last, the recovery

seems to be taking hold.

The Danish economy got off to a good start this year, growing by

0.9% in Q1. Healthy economic data for Q2 indicates that the economy

should continue improving. Now, we can dare to call this a real

recovery.

GDP growth looks set to be driven by a combination of private

consumption and exports in 2014. Private consumption, in particular,

could surprise on the upside, as consumer confidence has now

reached a seven-year high and has basically not been higher than its

current level even in good times.

Inflation has remained persistently lower than expected this year,

largely due to falling food prices. While wage growth has been

subdued, low inflation means real wages are growing.

The budget deficit is approaching the EU threshold, so the scope for

increasing public consumption is limited. The improvement in the

Danish economy suggests that fiscal policy ought to be tightened in

the coming years.

Danish economy accelerating

The crisis hit Denmark hard and the economy has been struggling to get into

gear ever since, even though numerous soft data readings have long indicated

greater optimism among both companies and consumers. However, it now

appears that the positive soft figures are about to finally translate into solid

hard data. The Danish economy grew by 0.9% in Q1 14 and while a number

of temporary factors help push growth higher, the economy performed well

overall. The healthy numbers have continued into Q2, indicating that growth

will continue and that we are entering a self-perpetuating recovery. We

expect the Danish economy to grow by 1.5% this year, rising to 2.0% in

2015. Private consumption is on the rise, driven by rising real incomes and

very high consumer confidence, while exports too are expected to contribute

significantly to growth.

Denmark is a small, open economy where growth is inextricably bound up

with the global cycle and especially the prevailing economic situation in

Europe. Hence, one reason for our optimism is that the European economy is

picking up: when things go well in Europe, the demand for Danish goods and

services increases, which keep the wheels turning here at home. That said,

the situation in Denmark itself is fairly good too. A combination of more

jobs, higher real wages due to low inflation and a more stable housing market

are helping to increase the potential for private consumption, which has

otherwise long been a laggard. Fiscal policy is set to be accommodative over

our forecast period and the budget deficit for 2015 will probably come close

to the EU’s 3% criterion.

Changes relative to previous forecast

Source: Statistics Denmark, Danske Bank Markets

Danish economy accelerating


% y/y 2014 2015 2014 2015

GDP 1.5 2.0 1.5 2.0

Private consumption 1.6 1.7 1.1 1.5

Public consumption 0.7 0.8 1.7 0.5

Gross fixed investment 2.3 3.2 2.2 2.8

Exports 3.2 3.8 2.8 3.4

Imports 3.1 3.4 2.3 2.6

Gross unemployment (thousands) 132 123 145 140

Inflation 0.7 1.4 1.0 1.5

Government balance, % of GDP -1.2 -2.9 -1.0 -2.3

Current account, % of GDP 6.6 5.8 6.8 6.1

Current forecast Previous forecast


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As we are on the cusp of a self-perpetuating recovery, fiscal policy should be

tightened, thus increasing the government’s room to manoeuvre and reducing

the likelihood of overheating.

One important proviso in relation to our growth estimate in this forecast is

that Statistics Denmark is due to publish revised GDP data in September after

carrying out its ‘2010 comprehensive revision’. Naturally, we do not know

the precise consequences of the comprehensive revision but we do know, for

example, that GDP for 2008 is set to be revised 2.5% higher. The upward

revision is mainly due to gross fixed investment being adjusted up by 12.1%,

as research and development will henceforth be classified as investment

rather than consumption in the production process. Public consumption will

be revised down by 2.8% and the tax burden is set to be revised down by

almost 3 percentage points. Precisely how the revisions will affect real

economic growth is still unclear, but given the information currently

available and with the experience of previous comprehensive revisions in

mind, it is not unlikely that there could be a rather significant effect on real

growth.

Private consumption up a notch

On paper at least, private consumption rose very strongly in the first three

months of 2014, namely by 2% – the biggest quarterly increase for eight

years. However, most of the increase was due to a technicality: insurance

payouts in connection with the storms in the final quarter of 2013 were

included as negative consumption of insurance, which produced an

artificially low figure for consumption in that quarter. The phenomenon was

not repeated this year, which then produced an automatic increase. However,

even corrected for this effect, consumption grew by a healthy 0.5%, helped

along by a further increase in car sales. Furthermore, Dankort (Danish debit

card) transactions indicate that growth has continued into Q2. So far this

year, consumption appears to have increased by slightly more than we had

anticipated, which is why we have revised our consumption growth forecast

for 2014 up a little to 1.6%. Corrected for the insurance effect, consumption

growth would be just 1.2% this year and thus not quite back to trend, but

certainly enough to make 2014 the best year for consumption since 2010.

Consumption is being boosted by very high consumer confidence – which

has only on a few occasions been higher than now – but first and foremost by

household incomes also doing better than expected. Low inflation boosts real

wage growth and higher employment is also lending a hand. Our forecast is

based on consumers spending around the same share of their income this year

as they did last year and then the consumption ratio rising a little in 2015. If

we returned to private consumption levels equivalent to 100% of incomes or

more, as we saw immediately prior to the crisis, we would clearly see a

considerably greater increase in private consumption. However, due to

household investments in housing (which do not count as consumption) and

pension contributions, household spending is already not covered by

household income. Hence, the volume of debt keeps growing in DKK terms

even if it is no longer outgrowing income. However, debt growth would

exceed income growth if the consumption ratio rose significantly from its

current level.

Consumption growth pulled by income growth

Note: Income is gross disposable income corrected for the

conversion of lump sum (capital) pensions in 2013 and 2014.

Source: Statistics Denmark and Danske Bank

Consumer confidence is exceptionally strong

Source: Statistics Denmark and Danske Bank

House prices have fallen, but debt has not

Note: Income has been adjusted for the conversion of lump sum

(capital) pensions in 2013 and debt for data break in Q4 13.

Source: Danmarks Nationalbank (central bank), Statistics

Denmark and Realkredit Danmark.


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That this might happen is by no means impossible and there could be an

upside risk to our consumption forecast. Nevertheless, it seems more likely

that the consumption ratio and debt will only increase slightly, as household

debt has already now reached the same level as in 2007, while the value of

houses relative to disposable income is down by around 25% from 2007.

Food prices pulling inflation down

We had assumed that inflation would gradually increase during the spring

and go above 1% over the course of the summer. However, that increase has

failed to materialise so far – mainly due to food prices falling by more than

can be explained by lower duties and taxes and despite global food prices

rising by more than 20% since the start of the year. While there are nascent

signs that food prices are beginning pick up, this will hardly be enough to

significantly lift inflation overall in 2014. Moreover, inflation remains very

low even when disregarding food prices – coming in at 1.0% in May. Prices

are being pulled lower by imports, in particular – in part because the Danish

krone has strengthened. However, there is still no sign of prices falling in the

domestic economy and damaging deflation is definitely not on the horizon.

On the contrary, slow price growth is helping to secure higher real incomes,

even though wage growth is modest. Both the private and public sectors saw

wages rise by 1.1% y/y up to Q1. New collective agreements in the private

labour market will increase wage growth slightly over the rest of the year and

rising employment increases the prospect of slightly higher local wage

growth. However, wage earners will not feel much difference, as rising

inflation will mean real wage growth remaining static.

Optimism growing in housing market

The Danish housing market has been on the mend since mid-2012, with the

average price of a single family house 2.6% higher in 2013 versus 2012.

Growth has continued into 2014, with Statistics Denmark’s monthly price

statistic showing an increase of 1.5% q/q in Q1. Hence, the housing market

appears to be recovering faster than we previously estimated. Given this, we

have raised our forecast and now expect house prices to rise by 3.1% in 2014

and 2.5% in 2015. Growth should be further supported by Denmark

apparently having left the worst of the crisis behind, with the labour market

improving and thus reducing household uncertainty on future income, which

in turn increases the propensity to buy. House price growth is mainly being

driven by low interest rates, which mean that the costs involved with buying

a home are very low at the moment. That said, the housing market has not

normalised yet and turnover is still very low.

Delving a little deeper into the statistics, it is clear that the Danish housing

market is divided. Prices and activity are not universally rising across the

country, for while the housing market is growing in and around the major

cities, the picture is rather different in other parts of Denmark. While there

are nascent signs of the pick-up spreading to the rest of the country

(according to Boligsiden’s market index), we expect the trend towards the

biggest price rises occurring in the major cities to continue.

Low inflation either way


Housing market clearly improving


Pronounced regional differences in the housing

market



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The apartment market is also worth watching, as owner-occupier apartment

prices rose by 8.4% y/y in 2013 and activity is increasing. Growth seems to

have continued into 2014, with prices rising by 3.1% q/q in Q1 and various

monthly statistics suggesting that prices have risen further in Q2. One

important factor here is low interest rates, which means buying an apartment

in the major cities is not that much more expensive than in other parts of the

country. Speculation has arisen on whether a new price bubble is forming in

the apartment market, especially in Copenhagen, but that is not our view.

Nevertheless, these high rates of growth are clearly not sustainable in the

long run, so it would be worrying if the current trend continues. We expect

apartment prices to rise further over the next couple of years, but would not

rule out a fall further down the line when interest rates begin to rise again.

Exports set to increase

Danish exports have generally performed well throughout the crisis and grew

1.2% in 2013 despite eurozone GDP falling by 0.4%. Exports rose 1.3% in

Q1 this year, due to a 3.2% increases in service exports, while goods exports

fell 0.1%. We remain optimistic on Danish exports across our forecast period,

for while our export barometer has been falling in 2014, it remains at a high

level and is indicating increased goods exports. Based on our model for

goods exports, we estimate that the export of goods will grow by around

1.3% in Q2 – mainly because the outlook for our largest export markets is

generally positive. Increased economic activity in the countries we trade with

means an increased demand for Danish goods. Hence, Danish exports have

the potential to maintain their healthy pace of growth. Overall, we expect

exports to grow by 3.2% this year, rising to 3.8% next year.

Danish wage competitiveness weakened by 30% in the 2000s, but has since

regained close to 15 percentage points of that lost ground due to slower wage

growth in Denmark than abroad. This year’s wage negotiations resulted in

just modest wage growth, so the partial restoration of competitiveness will

probably also support exports going forward. The government and the main

opposition party, the Liberals, agreed a new ‘Growth Package’ in June 2014,

while in May this year the government presented its new export strategy.

Both include initiatives that should make running a business and selling

goods abroad cheaper and more straightforward. However, it is difficult to

assess how great the overall impact of these initiatives will be, as they are

essentially just small steps in the right direction. Danish companies continue

to be hampered by high taxes and duties and wage competitiveness remains

weaker than it has been previously, so there is still room for further initiatives

that can help strengthen trading conditions for Danish companies.

As regards imports, we expect they will rise on the back of both higher

private consumption and higher Danish production. However, with import

growth likely to remain below export growth, net exports should make a

positive contribution to growth over our forecast period.

Apartment prices rising sharply

Source: Statistics Denmark, home and Danske Bank

Danske Bank’s export barometer points to rising

exports

Note: Goods exports represented by the goods exports figure from

Statistics Denmark’s monthly statistics for foreign trade.

Source: Statistics Denmark, Macrobond, Danske Bank Markets

Danish wage competitiveness has regained some

lost ground competitiveness

Source: OECD, Danske Bank Markets


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Current account surplus not a sign of health

The current account surplus remains high, hitting DKK137.5bn in April when

added up for the past year. The current account is essentially the difference

between how much Denmark saves and how much it invests. Hence, the high

current account surplus reflects how the crisis has hit Denmark very hard, as

considerably more is being saved up than invested. While the balance of

trade accounts for a large share of the surplus, the ‘income’ item also makes a

major contribution. This item includes mainly the net return on Danish-

owned assets held abroad generated by Denmark’s positive net foreign

wealth. We expect the annual current account surplus to fall to DKK125bn

this year and DKK 115bn next year, equivalent to, respectively, 6.6% and

5.8% of GDP. In our view, the fall will come on the back of increasing

investment, slightly rising household consumption and a decline in the net

return on Danish assets held abroad.

The current account made up 7.3% of GDP in 2013, taking the average for

the current account over the past three years to 6.4% of GDP in 2013, which

is above the upper limit of 6% that the EU considers an instability factor,

according to its procedure for monitoring a country’s macroeconomic

imbalances. Denmark therefore risks a further recommendation from the EU

to reduce its surplus. However, it is difficult to see what measures the

government should enact to tackle the surplus. Because of the fixed exchange

rate policy, Denmark cannot pursue a more accommodative monetary policy

in an attempt to boost consumption and investment, just as Denmark cannot

further ease fiscal policy, as it is already on the limit of what is permissible,

according to the EU.

Labour market doing better than expected

One of the positive surprises in the Danish economy is that employment is

doing better than expected. Total employment rose by 23,000 in 2013, even

though economic growth was modest. Moreover, total employment rose by a

further 7,000 in Q1 this year, which was above our forecast. All of the

increase came in the private sector, as public sector employment fell by

1,500. However, half of the increase was in the building and construction

industry and can probably be attributed to a temporary rise in activity due to

hurricanes Allan and Bodil and a mild winter. Nevertheless, the labour

market does appear to be improving overall. We expect employment to

continue to rise over our forecast period – something supported by Danske

Jobindex (online job ad website), where the number of new job ads is steadily

rising. Statistics Denmark’s tendency survey also suggests that companies

expect to hire more employees in the near future. However, we do not expect

companies to hire new labour at the same pace as before, as companies have

already hired a share of the labour needed to cover the higher production

levels expected going forward. We forecast that a little over 25,000 new jobs

will be created between the end of 2013 and the end of our forecast period in

2015.

Gross unemployment has fallen by 16,500 since the start of the year. The fall

is coincidental with the implementation of the cash benefits reform, which

among other things replaces cash benefit payments with a training and

education benefit for young people under the age of 30.

Current account surplus still dizzyingly high


Denmark’s current account is an instability factor

Source: EU, Statistics Denmark, Danske Bank Markets

Employment set to rise over next couple of years



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Some 45,000 persons received the training and education benefit in Q1 this

year, of which just 9% have been declared ready for training. Only those

declared ready for training are counted in the gross unemployment figures, so

the reform has resulted in a technical reduction in gross employment – or in

other words, gross unemployment underestimates actual unemployment. We

expect unemployment to fall further in the coming years, though not at the

same pace as employment, as we estimate that more people will enter the

work force again as job prospects improve. An increasing number of

companies are beginning to report labour shortages as a limiting factor for

production, so it would be good for the Danish economy if we could forestall

potential future labour market bottlenecks via reform.

Companies set to increase investment

The desire to invest has been lacklustre at best since the onset of the crisis.

However, optimism appears to be gaining a foothold, with confidence

surveys in the manufacturing industry coming in above the 2013 average in

all months this year except May. Improved corporate sales and earnings

prospects coupled with very low interest rates and more stable bank lending

mean there is potential for investment to grow in the coming years and we

expect business investment in particular to improve in 2015. While the

government’s so-called investment window (enhanced depreciation rules)

expired in 2013, this does not appear to have affected investment this year.

We expect gross fixed investment to increase by 2.3% this year and 3.2%

next year. Business investment should grow by 2.2% this year and 4.9% next

year. We also expect housing investment to rise this year in connection with

the damage repair activities prompted by hurricanes Allan and Bodil. The

expiry of the tax deduction scheme for home improvement costs

(‘BoligJobOrdningen’) will probably cause some forward housing investment

to be brought forward from early 2015 to late 2014 but we expect housing

investment to continue growing in 2015 on the back of higher house prices.

Accelerated public investment will also contribute to GDP growth this year,

but will negatively affect investment growth in 2015.

Budget deficit on the limit

We expect public consumption to grow by 0.7% this year and 0.8% next

year, which is a little below the government’s own estimates. Combined with

the government’s other income and expenditure, this means the deficit should

be around 1.2% this year, rising to 2.9% in 2015. The smaller deficit this year

reflects the one-off income generated by pension conversions. Disregarding

one-off income would mean the deficits for both years lying close to the

EU’s 3% threshold as stipulated in the Growth and Stability Pact. Hence, the

room for fiscal policy manoeuvring is minimal. Denmark risks breaching the

3% criterion in 2015 if growth disappoints for one reason or another, if

government income is lower than expected, or if there is unforeseen

expenditure. That fiscal policy is currently balancing on a knife edge is

undesirable. The expected improvement in the Danish economy therefore

suggests that the time has come to tighten fiscal policy. A tighter policy

would both reduce the risk of overheating and secure more room to

manoeuvre. Public consumption growth is on a scale that causes us not to

expect any great increase in public sector employment in the coming years.

Gross unemployment likely to fall further


Investment drought appears to be over


Minimal fiscal policy room for manoeuvre



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Denmark: Forecast at a glance

Source: Statistics Denmark, Danmarks Nationalbank, Macrobond, Danske Bank

National account 2012 2012 2013 2014 2015

DKK bn (current prices)

Private consumption 895.6 -0.1 0.0 1.6 1.7

Government consumption 519.5 0.4 0.8 0.7 0.8

Gross fixed investment 320.0 0.8 0.7 2.3 3.2

- Business investment 3.0 2.9 2.2 4.9

- Housing investment -8.0 -5.0 3.5 2.0

- Government investment 7.7 0.5 0.9 -3.0

Growth contribution from inventories -0.3 0.2 -0.1 0.0

Exports 1000.4 0.4 1.2 3.2 3.8

- Goods exports 610.7 -0.7 2.3 2.1 4.7

- Service exports 389.7 2.3 -0.5 4.9 2.4

Imports 907.7 0.9 1.7 3.1 3.4

- Goods imports 576.1 0.5 4.1 2.5 3.8

- Service imports 331.6 1.6 -2.5 4.2 2.8

Growth contribution from net exports -0.2 -0.2 0.2 0.4

GDP 1825.6 -0.4 0.4 1.5 2.0

Economic indicators 2012 2013 2014 2015

Current account, DKK bn 109.2 136.0 125.0 115.0

- % of GDP 6.0 7.3 6.6 5.8

General government balance, DKK bn -71.9 -17.2 -22.0 -56.5

- % of GDP -3.9 -0.9 -1.2 -2.9

General government debt, DKK bn 828.8 826.9 813.0 857.0

- % of GDP 45.4 44.5 42.7 43.5

Employment, ex. leave (thousands) 2728.2 2734.3 2757.8 2769.3

Gross unemployment (thousands) 161.8 153.0 131.6 122.8

- % of total work force (DST definition) 6.1 5.8 5.0 4.6

Oil price - USD/barrel 112.0 109.0 106.0 99.0

House prices, % y/y -3.3 2.6 3.1 2.5

Private sector wage level, % y/y 1.5 1.2 1.4 1.8

Consumer prices, % y/y 2.4 0.8 0.7 1.4

Financial figures 24/06/2014 +3 mths +6 mths +12 mths

Repo rate, % p.a. 0.20 0.20 0.20 0.20

2-yr swap yield, % p.a. 0.59 0.49 0.50 0.50

10-yr swap yield, % p.a. 1.82 1.90 2.00 2.25

EUR/DKK 7.455 7.46 7.46 7.46

USD/DKK 5.48 5.61 5.74 5.92

% y/y

Forecast


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Sweden

The uncertainty principle

In physics, the uncertainty principle is fundamental to all wave-like

systems. It asserts that there is a limit to the precision with which we

can measure complementary properties of variables – e.g. position

and momentum.

In economics, this provides a nice analogy to forecasting the business

cycle: the more accurately we attempt to determine the exact position

of the economy, the less accurate we become at judging the force of

the economy. Or put in another (slightly distorted) way: the more we

concentrate on analysis, the less astute we become at synthesis.

This might help to shed some light on why smaller set-ups often beat

the Riksbank and other institutions with immense analytical

capabilities at what should be its home turf: economic forecasting.

In times of stable economic cyclical patterns this is less of a problem.

However, when the underlying trend is disrupted, as in ‘the great

recession’, analysts are blindsided and successful forecasting requires

synthetic capabilities in order to separate the wood from the trees.

Unfortunately, we believe this is the main explanation for the fatal

forecasting and (thus) policy errors the Riksbank has committed

during the crisis.

Inflation has turned to deflation and price and wage expectations are

falling, especially if one takes into consideration the historical bias of

households/employees overestimating inflationary pressures.

Sweden, therefore, runs the risk of becoming liquidity-trapped while

the Riksbank is fretting about high household leverage – something

we believe to be a considerably more contentious objective. Inflation

is the primary target for the Riksbank. In our view, the Riksbank has

over-stretched the legal instruction to “promote a safe and efficient

payments system” in order to add household indebtedness (and

apparently without taking into account household assets) into the

monetary policy reaction function.

That said, the Riksbank has belatedly started to understand the

severity of the situation and cut rates in December and is likely to cut

rates again in July. There is even a non-negligible chance of further

cuts and perhaps even other measures, but any further monetary

policy easing hinges on continued underperformance of inflation vis-

à-vis forecast. Under any circumstances, any policy tightening is a

long way off and we only expect the repo rate to be hiked some time

deep into 2016 – i.e. past the forecast horizon.

Currently, we hope that the recovery in demand will prove sufficient

to at long last lead inflation higher. In 2014, inflation is expected to be

negative (-0.2% y/y), but rise towards 1.5% y/y during the course of

2015.

Meanwhile, demand (GDP) is expected to grow by 2.3% y/y in 2014

and 2.8% y/y in 2015 – some way over our estimate for potential

growth (1.5% y/y).

Too wrong for too long

Source: Riksbank, Macrobond, Danske Bank Markets Research

calculations


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Steady as she goes

In the first few paragraphs below, we will touch upon the most important

prerequisites when constructing a forecast for the small open Swedish

economy: (1) economic and financial conditions, including interest rates, the

exchange rate, stock and housing markets developments and also the overall

fiscal stance, and (2) international developments, or more specifically, the

weighted import demand on Swedish export markets, World Market Growth

(WMG).

Turning first to the financial and economic policy conditions environment,

we could simply conclude that economic policy will remain supportive to

growth even past the forecast horizon. Indeed, the Riksbank lowered the repo

rate in December 2013 and is set to lower rates to 0.5% in July. Thereafter,

we expect the Riksbank to keep the policy rate at very low nominal levels for

a very long period of time, mirroring the stance of, for example, the Federal

Reserve (Fed), the European Central Bank (ECB) and other major central

banks. The chances are that the Riksbank – if anything – will be forced to cut

rates further in the face of continued low wage and price pressures that serve

to keep real rates relatively high. Adding to this involuntarily tightening, we

expect a shift higher in market rates over the next few quarters with rising

(term and credit) risk premia not only in ‘tapering-struck’ American fixed

income markets, but also in Swedish fixed income markets.

Nonetheless, as the future unfolds, we trust that economic headwinds to the

Swedish economy will turn into tailwinds – if nothing else because the

Swedish economy comes across as fundamentally sound when compared

with most other developed economies, which should let cyclical forces work

uninhibited also in the domestic economy. Market rates as well as the krona

should thus resume a stronger but fundamentally motivated trajectory once

financial markets lay the tapering discussion to rest. In a year’s time, we

estimate that SEK will shoot towards the EUR/SEK 8.70 mark and that long-

term swap rates will move closer to 3% again.

Even in nations where fiscal policy is suitably concentrated on structural

issues, any fiscal decision is likely to have cyclical consequences when being

promulgated through the economy. The latest enacted (2014) tax cut for low

and middle income earners should help to uphold private consumption growth

in particular and GDP growth in general also in 2014. That said, the

presumably structural measures implemented during the last terms of

government – mainly tax cuts for low and middle income earners – are based

on an optimistic 2.5% y/y potential GDP growth rate, which is quite far from

our own 1.5% y/y estimate. While we can understand the political rationale

behind the arguments for stimuli, given the strong legal framework

surrounding the sustainability of fiscal policy, the government is likely in

time to be forced to cut back on some of its promises or even reduce

spending (or hike taxes).

In our forecast, government expenditures are nonetheless set to expand by

1.0% y/y in 2014 and increase even more, by 1.4% y/y, in 2015. This will not

help to rein in central government net lending at all and the deficit will

remain in excess of 1% throughout the forecast horizon and beyond despite

reasonably strong growth.

Coming to grips with the loss of market share?

Sources: National Institute for Economic and Social Research

(NIESR), National Institute for Economic Research (KI) and

Statistics Sweden (SCB). Danske Bank

Monetary conditions broadly balanced

Note: MCI is calculated as the deviation from a filtered trend of

different interest rates and an exchange rate index (all variables

are normalized and adjusted for inflation).

Source: Macrobond. Danske Bank


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Nordic Outlook

To conclude our discussion on the economic policy mix, our estimates

indicate that while monetary policy is expansionary (although not sufficiently

so) throughout the forecast horizon, we see a risk of overly expansionary

fiscal policy necessitating future austerity, perhaps at a more sensitive stage

of the business cycle.

As customary these days, domestic equity markets have not displayed any

allegiance to domestic real developments but rather instead have focused on

the tug of war between Fed tapering and real improvements in the US and

global economy. Going forward, we hope that fear of tapering can be

replaced by genuine confidence in the real economy, pushing also Swedish

equity markets to grow in line with nominal GDP – i.e. rise by 3-5% a year.

Another important asset market, vital for explaining, inter alia, household

consumption behaviour, is the housing market. Up until recently, we were

expecting a small drop in house price levels in order to become more aligned

to fundamentals. However, price data for 2013 did not show any signs of

abating, but rather a reacceleration during the course of the year, which has

continued into 2014. Nonetheless, we continue to expect a controlled decline

in price levels over the coming years, since we deem it necessary to

safeguard both household finances and the financial system. In 2014, we

expect prices to rise by 2.5% y/y, only to adjust slightly (-5% y/y) in 2015.

From a longer-term perspective, our view is that Swedish house prices are

quite far above their fundamental value, underlining that something will have

to yield: either prices demonstrate a more abrupt correction or – in a more

benign scenario – household incomes rise faster than house prices.

Summing up economic and financial conditions, we believe that supply and

price of credits no longer pose restrictions to the Swedish economy. It is

rather a lack of demand for credits – viable investment projects – that is the

issue. This probably has more to do with depressing expectations of future

incomes than anything else. A more pronounced shift in the income outlook –

in line with our short-term forecasts – will nonetheless benefit from capital

freely available. An admittedly anecdotal sign of improvement is the recent

bout of mergers and acquisitions that has involved Swedish corporates.

There is even a non-negligible risk that this process will pick up steam much

faster than we expect due to the extremely loose global monetary conditions,

creating a not so clear cut policy dilemma for many central banks.

Weak international demand and even weaker exports

Turning to international developments, we can clearly see that a stronger US

economy is reverberating through to the global economy, with the UK being

the prime beneficiary, core European country economies slowly healing and

indicators stabilising even in the hardest hit peripheral countries in Europe.

Furthermore, and in spite of recent volatility, in many developing nations the

economic situation is improving, which at least in some part is attributable to

the return of US demand.

Though the stabilisation is tentative, US and Europe represent some 85% of

Swedish export markets, solidifying previous expectations of a rebound in

Swedish export markets and hence export growth. All in all, world market

growth is expected to reach 3.5% y/y in 2014 and 5% y/y in 2015, which – to

be fair – is still quite weak compared with historical recovery phases.

Fiscal policy is too expansionary

Sources: KI and SCB. Danske Bank

Domestic demand stronger than external

Sources: KI and SCB. Danske Bank.


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Nordic Outlook

The opaque state of production factors and the volatility of external demand

over the past few years make it unusually difficult to decide if the investment

goods laden Swedish export industry will be at an advantage or disadvantage

as international demand again picks up. Exports in 2013 were thoroughly

depressing, falling 0.4% y/y. And despite a tentative stabilisation of exports,

developments have by and large continued to be bleak going into 2014.

That said, when looking ahead, export indicators seem mostly positive: the

Export Managers Index surveyed by Business Sweden, the export order

component in the NIER’s business confidence survey as well as in the PMI

survey all point to a broad-based upturn in exports over the coming months

and quarters. Importantly, Statistics Sweden’s data on export orders have, on

the whole, started to improve over the past few months. All in all, and despite

an amelioration of export indicators, some caution is probably warranted,

since these indicators have demonstrated an inclination to be overly

optimistic on the export outlook ever since the onset of the financial crisis.

Under any circumstances, the belated upswing in exports will not suffice to

reach pre-crisis standards, but at least it should produce a more positive full-

year reading for 2014. We expect a rise in exports amounting to 3.8% y/y for

the current year and 5.5% y/y in 2015. Thus, the Swedish exports industry is

finally expected to make up for some of the immense loss of market share

during the ‘great recession’.

A lop-sided investment outlook

A stylised Swedish business cycle model would demonstrate strong causality

from exports to investments, and despite the stronger reliance on domestic

industries for propelling investment growth in the wake of the financial crisis,

this relationship remains more or less intact. Investments fell 1.1% y/y in

2013, mirroring weak exports; the weak investment growth was also

concentrated to the manufacturing industry. Investments in the services

industry have also been notably lower, whereas housing investments are

booming, reflecting a continuously tighter housing market.

When looking ahead we cannot solely rely on Statistics Sweden’s

investments survey, since it has proven to be anything but reliable (especially

since the onset of the ‘great recession’). However, estimates of capacity

utilisation from both Statistics Sweden and the NIER have also been rising,

something that in conjunction with higher production implies a more positive

near-term outlook for investments – at least in the business sector.

Furthermore, and as we have highlighted in many previous editions of Nordic

Outlook, given a certain degree of structural transformation of the Swedish

economy and a prolonged period of low or even negative gross investments,

we would expect to see some dynamics developing going forward.

Restructuring and replacement investments, in combination with a rebound in

both external and domestic demand, should eventually suffice to drive (net)

investment growth in the business sector higher, even though we still expect

this to be rather subdued from a historical perspective.

One sector that seems unaffected by all negative dynamics surrounding it is

the housing sector. Fiscal incentives, an excess of cheap financing, a

continued rise in price levels and a chronic lack of housing supply –

predominantly in urban areas – has for better or worse kept the soil fertile for

housing investments. Now that labour market conditions seem to be

improving in tandem with the economic outlook, housing demand is – in a

Investments on the rebound



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Nordic Outlook

word – booming. Due to the risks we associate with the elevated price levels,

and the belated regulatory objective of stabilising mortgage debt, we have

nonetheless chosen to temper our expectations on housing investments

growth to some degree.

Public investments are expected to continue at a high level during the

forecast horizon but most of the zest has probably gone, and only small

increases in public investments in, for example, defence and infrastructure

have been announced.

All in all, we foresee solid growth in gross fixed capital formation over the

forecast horizon. In 2014, predominantly housing investments will push over-

all investments to 7.7% y/y. In 2015, the strains on capacity in the business

sector will be the main impetus behind an investment growth of 6.9% y/y.

Anaemic labour markets

Despite a superficial weakening of Swedish labour markets during 2013,

employment actually developed strongly throughout the year and the

lingering impression is instead one of relative stability. To some extent, this

may be due to the newfound flexibility among both employers and unions,

which has let hours worked (and thus by and large also the monthly pay

check) become a buffer instead of large lay-offs at the first sign of a

deceleration. This pattern has been discernible since the onset of the ‘great

recession’ and seems to have worked well, even though we cannot fully

suppress the feeling of this merely being traditional labour hoarding, albeit in

a somewhat more sophisticated version.

Despite the labour market normally lagging growth by a couple of quarters,

we can clearly see that labour markets have turned a corner with employment

on a more positive uptrend. Looking forward, we become even more

optimistic due to the continued improvement of labour market indicators. Not

only have notices of lay-offs come down to ‘normal’ levels, employment

plans and other survey data on the labour market are all improving. Also,

investment growth has historically proven to be perhaps the most reliable

indicator for employment since investments not only demand people to

construct and install, but also to operate, new equipment. We do not think

this time around will be much different but remain observant of the large

pool of people outside the labour force who might keep unemployment rates

higher for longer even with pronounced improvements in employment.

To conclude, the good news is that labour markets seem to be safely through

the worst, with most forward-looking indicators also pointing in a positive

direction. Therefore, we expect employment to improve, albeit slowly, in the

near term. Growth in average hours worked has also been depressed, which is

why a more pronounced upturn might take some time. As investment growth

picks up steam and developments in more labour-intensive industries such as

construction and retail also progress, we should nonetheless see some

improvement in both employment and the unemployment rate. In numerical

terms, we estimate that employment will grow by 1.0% y/y and 0.9% y/y in

2014 and 2015, respectively. This will barely be enough to push

unemployment towards 7.5% by the end of the forecast horizon. Students

looking for a job, low level of average hours worked and people returning

from outside the labour force constitute, however, risks to our forecast.

Slowly but surely, labour markets are improving

Source: KI and SCB. Danske Bank


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Nordic Outlook

Consuming and saving like never before

Nominal disposable income growth is low and has been low for some time.

However, due to even more subdued price increases, real disposable income

is expected to post decent growth rates, around 2% y/y, during the forecast

horizon. In 2014, large income tax cuts and still restrained pricing behaviour

will drive disposable income growth higher. In addition, short-term risks to

the housing market seem to have subsided and equity markets have shown

real stamina; therefore, possible wealth effects should also leave a positive

impact on the consumption outlook. Indeed, household confidence is

continuing on a strong note and is now some way above its historical

average, suggesting a rather dramatic shift from early 2013. Back then, the

general risk sentiment was artificially suppressed in anticipation of a number

of decisive international events, but notices of lay-offs had also shot up and

the Riksbank seemed intent on driving down housing wealth, no matter what

the costs. In response, households increased their savings further, from

already very high levels. Now, as headwinds have receded and been replaced

by tailwinds, we expect strong underlying household consumption growth

throughout the forecast horizon. Furthermore, the historically high savings

ratio even constitutes an upside risk, since we expect only a rather tepid

decrease over the coming quarters. Should a more positive international

scenario unfold, any remaining fears of joblessness and/or dramatic house

price falls will probably be laid to rest, leading savings lower faster than what

we currently foresee. However, drawing from experiences of recent years, we

have chosen not to revise this variable to any larger extent.

Restrained price developments, fiscal incentives, a stronger labour market

and generally improved sentiment lead us to forecast strong household

consumption growth of 2.3% y/y in 2014 and 2.5% y/y in 2015.

Imports and the inventory cycle

In an advanced small open economy such as Sweden, the outlook for imports

is largely a derivative of your export forecast. This is due to imports, in the

form of input material and goods, being an integral part of value-added

activities in the export sector. In Sweden, estimates of the import content of

exports range between one-third and one-half of value-added, which clearly

demonstrates the strong link. In addition, the high dependence on the export

sector implies that factor utilisation and thus consumption and investments to

a high degree are (directly and indirectly) dependent on exports. Hence,

unforeseen swings in the global outlook tend to have a very strong impact on

both imports and inventories and are a continuous source of forecast errors.

Naturally, but a tad vaingloriously perhaps, economists tend to assume being

omnipotent in forecasts, implying that imports follow the demand forecast

and there is seldom any need to assume anything but a return to stable

inventory levels – the inventory cycle (contribution) thus always returns to

stability (0pp contribution). In this respect, Danske Bank is no different from

our competitors and we expect only a very small positive contribution to

GDP from inventories this year. This hangs through from 2013, which saw a

marked inventory contribution in the final quarter, while the recoil in Q1 14

should carry through into 2015. Imports grow in line with external and

domestic demand components, implying a rather stable growth of 5.6% y/y in

2014 and 6.4% in 2015, despite a shift in underlying demand from domestic

to external sectors.

Consumption continuing on a strong note


An end to the era of large inventory swings



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Nordic Outlook

Clouded inflation outlook

In the preceding sections we have touched on the main components when

computing GDP. And the lingering impression is one of an improving

economic environment; it is a recovery that is rather bleak by any historical

comparison and one that is still laden with large risks to the downside, ready

to again push the world economy and the export-dependent Swedish

economy into the doldrums without much notice. Nevertheless, and despite

apparent downside risks, at long last, we are also able to identify upside risks

in the nexus of very strong liquidity, rising asset prices and a more

pronounced shift in sentiment.

To sum up, GDP growth is expected to accelerate during the forecast years as

we have chosen to keep our optimistic stance. In 2014, GDP is now estimated

to grow by 2.3% y/y (previously 2.5% y/y). For 2015, we have increased our

forecast to 2.8% y/y (previously 2.5% y/y) GDP growth. For both years, the

composition is tilted more towards domestic demand components than is

customary for this stage of the business cycle. That said, compared with

2014, the composition of demand should be more evenly distributed in 2015

as external demand and business sector investments increase their respective

shares of GDP.

Our forecasts might come across as optimistic but from a historical

perspective this is still a meagre outcome for a recovery phase. However, we

believe that the ‘great recession’ has altered the structures of the world

economy and, hence, also of the Swedish economy. The most obvious change

is a fundamentally warranted strengthening of the Swedish krona that is

expected to go some way. The stronger (real) SEK pushes low value-added

export companies into dire straits and some of them will probably be put out

of business or be forced to relocate production to other economies. Still

having a rather rigid labour market, the effects on the Swedish economy are

already visible – stubbornly high unemployment rates. Eventually, we might

see more decisive political measures to address this problem, but given the

highly sensitive ideological nature of the resolutions on offer, we suspect this

will take a long time. In the meantime, estimates on potential growth should

recede and we have ‘guesstimated’ – with the use of mainly demographical

projections – long-term GDP-growth at no higher than 1.5% y/y. Beware,

though, that given the very limited, post-crisis, time series on hand, effects on

potential estimates are difficult to assess quantitatively and are also very

sensitive to specifications.

Weak potential growth will mean that even the feeble growth rates foreseen

over the next couple of years should be able to reduce slack – increase

resource utilisation – and give way to increasing inflationary pressures. Make

no mistake about it though, current levels of resource utilisation are very low

and have undoubtedly been a restraining factor during the latest wage

negotiations. Going forward, the deflationary impact of low wage growth will

to some extent be balanced by low productivity growth, keeping cost

pressures – measured in terms of Unit Labour Costs (ULC) – positive but

below 1% y/y during the forecast horizon, levels incompatible with the

inflation target (2%). In addition, a structural strengthening of the SEK will

weigh further on the outlook, which is why we will probably need to move

beyond the forecast horizon to see the operational inflation target, CPIF (CPI

with fixed interests), being attained.

Bleak productivity growth…


but resource utilization still low…


..why inflation remains below target

Sources: SCB, Riksbank and Macrobond. Danske Bank


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Nordic Outlook

Riksbank coming to senses

In comparison to our March forecast, inflationary pressures have receded

further, in tandem with inflation expectations, and into deflationary territory.

Worryingly, genuine inflation, such as wages and rents, which tends to stick,

has come in much below both our own and the Riksbank’s forecasts. It is

now time to yield to the perilously low inflation and inflation outlook, thus

rejecting macro prudential arguments.

From a stabilisation policy perspective, the Swedish economy is arguably in a

worse state than, for example, the US or the Euroland economies since it has

higher nominal rates and lower inflation, implying considerably higher real

rates. Considering that medium- (and long-) term inflation expectations are

on a downtrend as well as many pre-crisis leverage decisions being based on

higher inflation (i.e. lower real rates) and real income growth projections,

risks of the Riksbank and the Swedish economy becoming liquidity trapped

are only one negative shock away. In short, the Riksbank must lower the repo

rate further.

Encouragingly, the Riksbank has recently declared itself guilty of making too

high inflation forecasts, hence holding interest rates too high as well.

Moreover, executive board members have, since the last monetary policy

meeting, expressed a very low threshold for additional negative inflation

deviations. Hence, the continued below-forecast inflation outcomes are

certain to provoke a near-term cut from the Riksbank. Furthermore, when

looking ahead, the Riksbank has clearly stated that not even stronger

economic data (than forecast) would suffice to change the Riksbank’s

expansionary monetary policy stance. We can take for granted this will imply

additional postponements of the first hike in the Riksbank repo rate forecast.

The fact is that the Riksbank’s communication suggests that it wants, or

perhaps even needs, to see inflation closing in on the 2% inflation target

before eventually hiking rates. We would even go so far as to say that the

Riksbank also wants to see ‘the right type’ of inflation before embarking on

any hiking cycle.

What then, is the right type of inflation? It is, in two words, wage inflation.

Bar domestically generated, old school, wage inflation – and of some

magnitude – we believe that the Riksbank will be very attentive not to push

inflation expectations further south of the inflation target.

To sum up, we firmly believe the Riksbank cannot avoid cutting rates at the

July meeting and that there is a non-negligible chance of further, and what we

feel would be warranted, monetary policy measures. However, what the

Riksbank should do and what the Riksbank eventually chooses to do, always

seems to be shrouded in political and philosophical veils of unknown origin

which is why we have refrained from incorporating additional monetary

expansion into our point forecasts. Put another way, the uncertainty principle

also pertains to our Riksbank forecasts; we feel extremely confident in

judging the current position of monetary policy. As for the momentum of the

economy and the future monetary policy stance, we become less certain, less

quantitative. Our long-held, synthetic, view of the effects of the ‘great

recession’ nonetheless suggest that ‘lower for longer’ will remain the

Riksbank mantra for years to come.

A cut! And a hike is a long way hence…

Sources: Riksbank and Macrobond. Danske Bank.


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Sweden: Forecast at a glance

Source: Danske Bank

National account 2012 2012 2013 2014 2015

SEK bn (current prices)

Private consumption 1718 1.6 2.0 2.3 2.5Government consumption 956 0.3 2.0 1.0 1.4Fixed gross cap formation 674 3.3 -1.1 7.7 6.9Stocks* -4 -1.2 0.1 0.0 -0.1Domestic demand 3348 1.6 1.4 3.0 3.1Exports 1722 0.7 -0.4 3.8 5.5Aggregate demand 3344 0.3 1.6 3.0 3.0Imports 1516 -0.6 -0.8 5.6 6.4Net exports* 206 0.6 0.2 -0.5 -0.1GDP 3550 0.9 1.6 2.3 2.8 - GDP, Calendar adjusted 1.3 1.6 2.5 2.5

* contribution to GDP growth

Economic indicators 2012 2013 2014 2015

Trade balance, SEK bn 84.6 81 83 75in % of GDP 2.4 2.2 2.2 1.9Current Account, SEK bn 229.1 246 226 216in % of GDP 6.5 6.8 6.0 5.5

Public sector savings, SEK bn -24.8 -44 -60 -49in % of GDP -0.7 -1.2 -1.6 -1.3Public debt ratio, % of GDP* 38.3 40.5 41.2 40.8

Unemployment, % of labour force 8.0 8.0 8.0 7.9Hourly wages, % y/y 3.1 1.9 2.3 2.6Consumer prices, % y/y 0.9 0.0 -0.2 1.2House prices, % y/y -1.4 3.5 2.5 -5.0* Maastricht definition

Financial figures 24/06/14 + 3 mths + 6 mths + 12 mths

Repo-rate 0.75 0.50 0.50 0.502-yr swap yield 0.83 0.85 0.85 0.8510-yr swap yield 2.14 2.25 2.35 2.55EUR/SEK 9.12 8.90 8.80 8.70USD/SEK 6.70 6.69 6.77 6.90

Forecast

% y/y


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Nordic Outlook

Norway

Oil investment likely to hurt GDP growth

Oil investment is set to fall further than expected in 2015, pulling

down GDP growth next year.

Growth in the Norwegian economy looks likely to stabilise

nevertheless, due to stronger export growth and private consumption.

The risk of a serious setback is still limited and we expect oil

investment to pick up again from 2016.

Inflation will be around target and unemployment largely stable.

Although the krone has strengthened somewhat, it may have further

to go against the euro.

The chances of a rate cut remain low and interest rates will probably

go up after summer 2015.

Slower growth but still high levels of activity

After a long period of strong growth, the Norwegian economy decelerated

towards the end of 2013. The slowdown was due to lower growth in oil and

housing investment. While growth looks set to be somewhat higher than

expected this year, a drop in oil investment could spell weaker growth next

year. We nevertheless expect growth to be more or less on trend over the next

two to three years, or around 2-2.5%. Lower activity in the oil sector will

make a weaker contribution to growth in the Norwegian economy, but this

will be offset to some extent by stronger export growth, more relaxed bank

lending standards and a fresh upturn in housing investment. Weak growth in

private investment will be countered to some extent by strong growth in

public infrastructure investment. We therefore anticipate only a moderate rise

in unemployment and together with wage growth of around 3.5%, this will

keep growth in private consumption at sensible levels. The growth pause will

nevertheless give Norges Bank space to keep its policy rate unchanged for

the next year. Although the krone has rallied somewhat since the previous

Nordic Outlook, we can see potential for further appreciation, especially

against the euro.

Growth pause next year

Source: Macrobond


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Nordic Outlook

Drop in oil investment to bring growth pause in 2015

The strong growth impulses from oil and housing investment diminished in

H2 13, pulling down economic growth and private consumption was weak.

However, there are signs of these impulses beginning to strengthen again

somewhat. Mainland GDP has climbed 0.5% q/q for three successive quarters

and Norges Bank's regional network survey is suggesting a rather brighter

growth outlook than at the end of 2013.

Oil investment will make a solid contribution to growth once again in 2014,

albeit a much smaller one than in 2013. According to Statistics Norway's

latest oil investment survey, oil investment will grow by around 5-6% in

2014, much the same as indicated by the previous survey in March. Oil prices

are holding well over USD100/bbl, reducing the downside risk in the long

term too. However, there have been clear signals from the oil companies that

investment levels in coming years will be much lower than previously

assumed. Parts of the supply sector have also begun to feel a drop-off in

orders and some have announced redundancies. In the June survey, the oil

companies expect investment to fall more than 10% next year. This estimate

is associated with uncertainty, of course, but the drop will undoubtedly still

be larger than we had anticipated. We have therefore revised down our

forecast for growth in oil investment in 2015 to a negative 10% and this is the

main reason why we have cut our forecast for GDP growth.

With several relatively large projects due to start-up from late 2015, we

expect the decline in oil investment to be short-lived. Unless anything fairly

dramatic happens to oil prices over the next couple of years, we therefore

expect investment in the sector to pick up again from 2016.

As expected, the deterioration in the housing market in 2013 led to a

relatively sharp drop in housing investment in H1 this year. The market for

existing homes seems to have stabilised, however, and may even be

improving. Sales of new homes have also picked up somewhat from their low

level during the winter and housing starts have stabilised. We therefore

expect housing investment to bottom out in late summer and start climbing

again towards the end of the year. We then anticipate moderate growth of

around 2.5% next year.

A significant amount of public infrastructure investment is also planned, as

can be seen from the near 50% leap in civil engineering orders since the end

of 2013. This has been enough to bring about an increase in overall

construction orders despite the downturn in building activity.

Private consumption has picked up in recent months. The annual rate of

increase in retail sales is now above 2.5% after strong growth in Q1. There

are probably several reasons for this, including a reaction to the weak

consumption towards the end of 2013. We have also seen a tendency in

recent years for consumer spending to perform better in the winter months,

which may be due to holiday patterns. In this case, growth will slow again

over the summer. However, we also suspect that consumers are spending

more money back home in Norway than in previous years given the weaker

krone and the weather.

Oil investment to fall next year

Source: Macrobond, Danske Bank Markets

Homebuilding down

Source: Macrobond


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Nordic Outlook

If so, there could be surprisingly strong growth in private consumption in

2014. Either way, we see no real danger of a serious downturn in private

consumption unless household finances deteriorate sharply.

Global economic growth has accelerated and, together with a substantial fall

in the krone, given exporters a real lift. We have been seeing this for a while

in leading indicators such as the PMI and Statistics Norway's business

tendency survey. Hard data from Statistics Norway also shows an increase in

export orders of more than 11% y/y in Q1. The upturn in the export industry

also helped overall industrial production to climb almost 1% q/q in Q1

despite the slowdown in oil-related industries. Given the projected drop in oil

investment next year, we believe that industrial production will grow

somewhat more slowly going forward. On the other hand, there has been

substantial growth in the number of rigs and production vessels in recent

years and the market for maintenance and repairs has almost doubled since

2007. This will help offset the impact of lower investment in parts of the oil-

related sector.

The finalisation of the new countercyclical capital buffer has removed a great

deal of the uncertainty facing Norwegian banks and we believe that they are

well on course to satisfy the new capital requirements. As a result of this and

a substantial increase in margins in recent years, it appears that credit is now

more readily available. This is being supported by global capital markets

continuing to rally, resulting in large volumes and lower credit premiums.

Interest margins also seem to be on the way down for both households and

businesses. Norges Bank's latest lending survey confirms this picture.

Reduced risk of housing crash

After several years of strong growth, the housing market turned downwards

last summer. House prices rose more slowly, time to sell increased, turnover

fell and stocks of unsold homes grew. The risk of a serious downturn in the

housing market therefore seemed to be mounting, but we still did not

consider it likely. The most important reason for this was that households'

ability to service their mortgage debt was still very good.

All experience suggests that for as long as there is no dramatic deterioration

in households' debt-servicing capacity, the housing market will not collapse.

At the end of 2013, Norwegian households were spending just over 6% of

disposable income on interest payments. This is considerably lower than in

the 1980s and also lower than in 2002 and 2008.

A decline in household debt-servicing capacity can come about through two

main channels – a drop in incomes or a sharp increase in interest rates.

Neither of these seems particularly likely in the coming years, which is why

we still see the risk of a crash as limited.

Developments since the previous Nordic Outlook have further reduced the

risk of a housing crash in Norway. Prices have begun to rise again, turnover

is high and time to sell is increasing.

The stock of unsold homes registered on the website FINN may be growing,

but turnover is growing more quickly, so the stock-to-sales ratio is falling

again.

Export industry on the up

Source: Macrobond

Stock-to-sales ratio falling again

Source: Macrobond, Danske Bank Markets


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Nordic Outlook

Unemployment stabilising

With economic data painting a somewhat mixed picture, developments in the

labour market serve as a useful cross-check for whether growth is above or

below trend. Gross unemployment, which includes those on job creation

schemes and is our preferred jobless measure, rose gradually in 2013 but has

since begun to stabilise or even creep down. Discounting the volatility

surrounding the Easter period, it appears that unemployment is now at its

lowest since October 2013.

Statistics Norway's LFS data also shows that employment is picking up. The

LFS data may, however, be overestimating employment at the moment, as

there is a large element of foreign labour in industries that are now

downsizing, such as construction and shipbuilding, and these people will not

show up in the LFS data.

Based on our forecast that economic growth will gradually pick up, we

expect employment growth to eventually exceed 1%, with the result that

unemployment stabilises around current levels. If our predictions of slower

growth next year hold, we may see a temporary increase in unemployment in

2015, but it should then return to somewhere around today’s levels in 2016.

One reason is that growth in the labour supply is slowing as a result of lower

net immigration. This is probably due to the deterioration in the labour

market, which goes to show that the Norwegian labour market has become

more flexible since the enlargement of the EU in the 2000s.

Inflation stabilising below target

Core inflation is on the rise and the period of disinflation definitely seems to

be over. This is due primarily to the weakening of the krone exerting upward

pressure on import prices. At the same time, productivity growth is still

moderate and this, coupled with wage growth close to 4% last year, has

contributed to domestic prices rising at 2.75-3% y/y.

Given the normal time lag of six-nine months between movements in the

krone and prices of imported goods in the stores, higher import prices will

probably continue to push up core inflation for a few months yet. Prices for

consumer goods at importer level (‘at the border’) were still more than 10%

up y/y in Q1, which supports our view that imported inflation could remain

high for a few months yet even though the krone has strengthened this year.

There is also the prospect of wage growth of around 3.5% this year, which is

slightly lower than last year. Together with signs that productivity growth has

bottomed out, this means that domestic inflation will stabilise. We therefore

expect core inflation to rise over the summer but then drop back towards an

annual rate of just over 2% towards the end of the year.

Gross unemployment on the way down

Source: Macrobond

Import prices continue to climb

Source: Macrobond


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First rate hike pushed back further

The krone has gained more than 4% this year on an import-weighted basis.

We see some potential for further appreciation, but do not anticipate a return

to the levels of early 2013 for some time.

The relative economic situation nevertheless indicates that the krone will

remain comparatively strong for the next couple of years. With expectations

of relatively big movements in the major currency crosses during the same

period, we can see the krone gaining a fair bit against the euro, falling against

the dollar and improving only moderately against the Swedish krona.

As expected, Norges Bank left interest rates unchanged at the June meeting.

However, the interest rate path was revised down further than expected in the

new monetary policy report, due to lower rates abroad and a big downward

revision of the forecast for oil investment. The central bank now envisages

unchanged interest rates through to the end of 2015 with a gradual increase

after that. Should growth in the Norwegian economy turn out to be

significantly weaker than anticipated, the bank could cut interest rates further.

Based on our forecasts for growth, inflation, exchange rates and so on, we

expect interest rates to remain unchanged through to the end of next year.

Norges Bank caught the fixed-income market on the hop and the market is

now pricing in a greater probability of a rate cut than the bank itself. This

means, among other things, that prices for interest rate hedging – in other

words long-term interest rates – are now very low.

Market pricing more aggressive than Norges Bank

Source: Macrobond, Bloomberg, Danske Bank Markets


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Nordic Outlook

Norway: Forecast at a glance

Source: Danske Bank

National accounts 2012 (2011 prices) 2013 2014 2015

NOK bn

Private consumption 1163.7 2.2 2.0 2.3Public consumption 602.7 1.8 2.0 2.0Gross fixed investment 583.8 8.5 0.6 -1.3 Petroleum activities 166.1 17.0 5.0 -10.0 Mainland Norway 391.3 4.4 -0.7 2.0 Dwellings 129.4 6.5 -5.1 2.5 Enterprises 175.8 0.1 -0.7 0.9 General government 86.1 10.1 5.8 3.2Mainland demand 2157.6 Growth contribution from stockbuilding 0.0 -0.2 0.1Exports 1165.8 -3.3 0.7 1.0 Crude oil and natural gas 572.4 -7.6 1.0 1.0 Traditional goods 482.5 0.3 1.3 3.5Total demand 3626.7 3.2 0.7 2.2Imports 796.2 2.7 1.9 4.5 Traditional goods 482.5 2.5 2.3 2.4GDP 2830.5 0.6 1.7 1.8 GDP Mainland Norway 2146.1 2.0 2.2 2.2

Other posts 2013 2014 2015

Employment, % y/y 1.2 1.0 1.0Labour force, % y/y 1.1 1.0 1.1Unemployment (LFS), % 3.5 3.5 3.6Annual wages, % y/y 3.9 3.5 3.5Consumer prices, % y/y 2.1 2.2 2.2Core inflation 1.6 2.5 2.4

Financial figures 24/06/2014 +3m +6m +12m

Deposit rate 1.50 1.50 1.50 1.502y swap rate. % 1.84 2.10 2.35 2.6510y swap rate, % 2.91 3.00 3.10 3.25EUR/NOK 8.31 8.00 7.95 7.85USD/NOK 6.10 6.02 6.12 6.23

% y/y

Forecast


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Finland

The third year of decline

We have revised down our forecast and expect Finnish GDP to

shrink by -0.2% in 2014. The Finnish economy slipped deeper into

recession in Q1 and manufacturing figures were disappointingly

weak in April. On a positive note, new manufacturing orders grew in

February-April. We continue to expect a modest export-led recovery

in H2 14 on the back of growth in western markets, although the

emerging recession in Russia casts a shadow on exports.

The outlook for domestic demand is dull. Household purchasing

power is flat, due to tax hikes and a moderate wage agreement.

Surveys point to weak expectations in retail trade and especially

construction. Manufacturing capex is also weak. Forest industry has

announced new investments plans but these will only be realised after

2015.

Due to changes in the party leadership, both the prime minister and

minister of finances have changed. The new government is trying to

implement structural changes and carry out fiscal austerity measures

to cut the deficit, although there is also talk about a ‘mini stimulus’.

The unemployment and housing market outlook is weak but a severe

deterioration is not in sight. Low construction activity is helping to

keep housing prices flat in 2014-15. Household and corporate balance

sheets continue to be healthy and very low interest rates support

activity as nearly all housing loans are linked to variable Euribor

rates.

Public finances are in distress, as falling GDP is leading to lower tax

revenues and higher spending. Despite rising debt levels, Finland

continues to enjoy one of the lowest risk premiums compared with

Germany and has a triple-A rating from all major credit agencies.

Relative to other advanced or euro countries, Finnish public finances

are still among the best, even if they are now lagging other Nordic

countries.

It’s a long way to recovery

Finland has remained in recession for the longest period since the

depression in the early 1990s: GDP fell 0.4% q/q in Q1 14, making it

eight consecutive quarters without growth. The situation has not

improved much in Q2 14, although seasonally-adjusted the GDP indicator

grew by 0.8% m/m in April. Retail trade is weak, unemployment is rising

and exports to Russia and the flow of tourists from Russia keep falling.

The figures provide a poor starting point for 2014. We expect net exports

to other EU countries to pull GDP on a positive trend in H2; domestic

demand continues to crawl slowly.

Changes relative to previous forecast

Source: Danske Bank Markets

OECD leading indicator signals growth in 2014

Source: Macrobond

2014 2015 2014 2015

GDP -0.2 1.5 0.5 1.8

Unemployment rate 8.5 8.4 8.4 8.3

Inflation, % 1.2 1.2 1.3 1.4

Earnings, % 1.2 1.2 1.3 1.2

Housing prices, % -0.5 0.5 0.5 1.5

Current account, % of GDP -0.7 -0.5 -0.5 -0.2

Public debt, % of GDP 59.0 61.0 58.5 60.5

Current forecast Previous forecast


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Nordic Outlook

Despite weak retail sales, the figures for private consumption were

surprisingly strong in Q1. Private consumption rose 1.1%, up q/q, as car sales

and services rose. On the other hand, car sales are still recovering from a tax

shock in 2012 and we do not fully trust in strong growth in services taking

place. Investments were 5% lower y/y. Construction fell deeper and industrial

capex sunk in 2013. Public consumption rose slightly by 0.5% y/y, although

the government is trying to curb expenditure. Exports fell 3.0% y/y due to

weakness in Russia and other emerging markets. Exports to the EU have

started to rise, while exports outside the EU were further down in April.

Manufacturing output figures were also downbeat in April.

We expect the export markets in the EU to gain more strength in 2014-15,

especially if pent-up demand for investment goods continues to transform

into new orders. Exports outside the euro area are suffering from a strong

euro and the export outlook to Russia remains poor.

Leading indicators have improved, but continue to be on the weak side.

Consumer confidence has been stable, but consumers are pessimistic about

their current situation. Manufacturing confidence has slightly improved in

recent months. The OECD leading indicator, which has been fairly robust in

recent years, has continued to improve. The best sign of recovery in

manufacturing comes from new orders data, which rose for three months

from February to April. The rise seems to be widespread – not just a few

large orders – which supports our view that exports are pulling Finland out of

the recession.

Assuming that the US leads a global recovery and the euro area is also

gaining strength, we expect output to resume its slow growth during H2 14.

We have revised our estimate for 2014 downwards as the Russian recession

is weighing on exports, Q1 figures disappointed and manufacturing output

was weak in April. We expect GDP to fall by -0.2% (previously +0.5%).

Since our previous forecast, the government has added new measures to

fiscal austerity, which will weigh on domestic demand in 2015.

Consequently, we expect the Finnish economy to grow only 1.5% in 2015.

Consumers bearing the burden of fiscal austerity

Consumer buying power has been roughly flat since 2012, while

consumption grew substantially in 2010 and 2011 on the back of low interest

rates and rising real wages. The outlook for 2014-15 is dull as consumers hit

by low real wage growth also have to bear the burden of tough fiscal

measures aimed at balancing the budget.

Private consumption rose 1.1% up q/q and 0.5% y/y as car sales and services

rose. Car sales are still recovering from a tax shock in 2012 and we do not

fully trust in strong growth in services taking place. The services component

experienced an unusually large jump, which does not seem to reflect the real

situation. Small services entrepreneurs, such as hairdressers, complain that

people are spending less money. The value of retail trade sales grew by 1.8%

y/y in April. Daily consumer goods sales rose by 6.4%, while sales in

department store trade went down by 1.7%. Wholesale trade sales declined

by 1.3% and motor vehicle sales by 4.1% from a year ago. The increase in

retail sales was partly also due to Easter being in April, while in 2013 it was

at the turn of March and April. Easter usually has a positive impact on the

sales of food. The outlook for the rest of the year is weak as consumer

New orders are finally rising e

Source: Macrobond

Inflation and wage growth continue to decline

Source: Macrobond


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confidence remains at low levels and purchasing power could modestly

decrease in 2014-15. In the forecast period, wage growth will roughly be in

line with inflation at a time when tax increases take their share as well. As a

part of the austerity measures, the pension index is set to rise only 0.4% in

2015. We also expect consumer confidence to remain at mediocre levels at

best as employment figures continue to weaken in the next few months.

Low interest rates will help to sustain private activity, but it is already a low

savings rate with little additional room to boost spending. We expect private

consumption to grow 0.1% in 2014 and 0.5% in 2015.

Inflationary pressures are modest because of the existing output gap (roughly

2-4% of the GDP), no pressure from global food and energy prices, and

moderate wage increases limit cost pressures. Tax hikes pushed consumer

prices by approximately 0.5% higher at the beginning of the year, and some

new hikes are forthcoming at the beginning of 2015. Inflation slowed down

to 0.8% in May, mainly thanks to slowdown in food prices. HICP inflation

was 1.0%, still higher end in the euro zone. We expect the national inflation

index to average 1.0% in 2014 and 1.2% in 2015.

Russian recession freezes outlook for exports

The volume of exports fell 3.0% y/y and 1.9% q/q in January-March 2014.

The contraction was based on goods and services exports. Finland is a rare

example of a euro area country that has not seen any real growth in exports in

three years. Exports of goods have suffered a long-term damage from the

descent of Nokia and forestry industries. Fortunately, one can lose Nokia

only once. Exports have also suffered from a high share of investment goods,

which are in short demand at the moment, and poor price competitiveness

caused by wage increases between 2008-12. If pent-up investment demand is

released in Europe and Finland regains competitiveness through wage

moderation, exports could grow relatively fast in the medium term. There

exists a widespread drive to improve competitiveness in order to preserve

strong manufacturing base in Finland. Exports are seen as the best and only

way out of the slump. Labour unions have agreed on a very moderate wage

rise in the medium run. Wages will rise only 20 euro per month in 2014 and

0.4% in 2015, plus some wage drift. In addition, the corporate tax rate fell to

20% at the beginning of 2014. Thus, all bets are on exports and not domestic

demand.

The outlook for the main Finnish export markets in Germany and Sweden

have remained relatively good and also other EU countries have performed

well. Exports to Russia failed to rise in 2013 as the Russian economy

developed poorly then. The crisis in Ukraine has weakened the Russian

outlook further and we expect Russia to be in a recession in the near term.

The value of Finnish exports to Russia fell 23% y/y in March and we have

not seen the worst yet.

The crisis in Crimea caused some tension to EU-Russian commercial

relations and the weaker rouble is hitting Finnish export competitiveness in

Russia. We expect Russian GDP to fall in 2014-15, which keeps the export

outlook poor. Although we do not expect stringent EU sanctions against

Russia, exports are likely to fall further. Russia accounted for about 9.5% of

Finnish goods exports in 2013 and 18% of goods imports (oil and gas count a

lot). Russian trade has been volatile in the past too. The collapse of trade with

Exports to Russia are volatile

Source: Macrobond


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the Soviet Union was a major reason behind the Finnish depression in the

early 1990s. The Russian crisis in 1998 nearly halved Finnish exports to

Russia, but that time Finland did not suffer a recession, as other exports

performed well and Nokia was growing fast. This time could be a halfway

event; the Finnish economy is not nearly as sensitive to Russia as it was to

the Soviet Union but Finland does not have Nokia-size success stories either.

The events behind the eastern border have other important implications for

Finland as well. Not only trade but tourism and some investment plans

(Rosatom building a nuclear reactor in Finland) could be affected. The

tension and weak rouble have already kept many Russian tourists away from

Finland. Russian tourists comprise nearly half of the visits to Finland. The

number of Russian tourists staying overnight in Finland fell 20% in April.

Poor manufacturing confidence and low order book levels suggest that

exports continue to perform modestly at best in Q2 14. Assuming a continued

recovery in the euro area and a brighter global outlook, we expect exports to

rise by 1% in 2014 and by 4% in 2015.

Finland had a current account surplus from 1994 to 2010, but fell with the

trade balance into a small deficit in 2011. The current account deficit was

1.1% per GDP in 2013. We expect a current account deficit also in 2014-15,

driven by large net transfers. The trade balance has actually returned to a

surplus, due to falling imports. The deficit is forecast to improve to 0.7% per

GDP in 2014 and to be nearly balanced by the end of 2015.

Investments remain depressed

In 2013, investments fell by nearly 5%. In Q1 14, the decline continued albeit

at a slower pace. Construction investments fell by 1.1% while the volatile

machinery, equipment and transport equipment investments increased nearly

13% from the previous quarter. Weakness in the construction sector was

expected as building permits have slipped. Although the decline in permits

has ended, the low level indicates a difficult year ahead. Low demand in

manufacturing does not bode well for investments until exports markedly

pick up from current levels.

Sentiment has partly improved in H1 14 as a few major investment decisions

have been released: Metsä Group will invest EUR1.1bn in a bio-product mill

and Stora Enso will spend EUR110m on its Varkaus factory signalling a

positive turn in forestry industry and in the economy in general. However,

these investment will have direct effects only after 2014.

We forecast investments continue to decline 2.5% in 2014, which would

mark a third consecutive year that they have declined. The previous time

investments contracted for three successive years was during the early 1990s

recession. In 2015, increasing external demand and a recovery in the

construction sector is expected to turn investments into 2.5% growth.

Housing market quiet

Prices for old dwellings in blocks of flats and terraced houses turned into a

mild decline last summer. In Q1 14, the fall continued by 0.7% q/q.

According to the preliminary figures, April was also poor as prices came

down 0.9% m/m. Housing prices have been broadly flat for the past three

years in most cities and increased primarily in Helsinki. In 2013, prices

increased by 1.6%, driven by the development in the Helsinki Metropolitan

Investment goods keeping Finnish exports down

Source: Macrobond

Indicators suggest weak construction activity

Source: Macrobond


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Area. In 2013, an important event in the housing market was when the

transfer tax was increased in March. This contributed to a clear fall in

property transactions and increased selling times accordingly. The number of

residential property transactions in 2013 was 12% below the level seen in

2012. The housing market is still quiet as transactions were down 10% y/y in

Q1 14. Due to the poor economic development, intentions to buy a dwelling

were meagre in H1 14. One headwind is easing: recently, average housing

loan margins have turned into a decline. Competition for an ever smaller

number of good banking customers is fierce. Housing loan stock growth has

stabilised around 2% y/y in H1 14, well below the 6% figures seen in 2009-

12 or the over 10% levels in 1998-2008.

Housing market conditions remain uncertain for 2014. The demand side is

being squeezed due to unemployment increases and real wages stagnating.

The economic outlook is murky and the incentive to buy has declined as the

share of deductibility of housing loan interests in taxation is set to decrease to

75% in 2014 and 70% in 2015.

Despite some of the above-mentioned headwinds, there are also factors

pushing in the other direction. The interest rate burden has stayed at record

low levels despite increases in bank lending margins. The debt-to-income

ratio of Finnish households, although it has been increasing, is still well

below that of other Nordic countries. Finnish households are still able to

amortise debt as the exceptionally low interest rate transmits effectively in

the Finnish housing market due to the high percentage of variable rate loans.

Also, the chronic lack of supply in growth centres, especially the Helsinki

Metropolitan Area, supports the price level. As mentioned in the previous

segment, the outlook for newbuilding is subdued.

In order to prevent future housing market bubbles, in February the

government proposed a new loan-to-value limit in housing loans. The law is

set to come into force from H2 16.

The law will limit the housing loan amount to 90% (95% for first-time

buyers) of the collateral, which is usually the dwelling in question. As the

definition of the collateral includes other assets, this should not significantly

affect the housing market as it currently lies. The main benefit is for the FSA

to limit the collateral conditions in exceptional circumstances. The banking

industry has also taken a positive stand on the law. We expect nominal prices

to decline 0.5% in 2014. Next year, we forecast housing prices to increase by

0.5%. Despite the past price increases, we do not see a major risk of a bubble,

as prices have generally risen in line with earnings. A major decline in

housing prices could be initiated only by much higher long-term

unemployment or surging interest rates, which both look unlikely despite the

lacklustre economic outlook.

Public debt rising, austerity ahead

Prime minister Jyrki Katainen announced in April that he will resign from the

post and seek a place within the European Commission. Also, the finance

minister changed in June as Jutta Urpilainen lost to Antti Rinne in a party

election in May. Despite the major changes in personnel, the new

government, led by Alexander Stubb, will continue with the same coalition of

five parties. The next parliamentary elections are set to be held in spring 2015

Housing prices in the Nordic countries

Source: Macrobond

Debt level inching up in the absence of growth

Source: Macrobond


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and legislation will be based on previously agreed upon issues with limited

new initiatives.

One of the main economic objectives of the current and previous coalition

government has been to stop the rise in the debt level. However, after two

years of falling GDP, the public debt-to-GDP ratio increased from 49.3% in

2011 to 57% at the end of 2013. The government has raised taxes and cut

spending across the board. Central government spending levels in the budget

for 2014 are slightly below 2013 figures. According to the budget, the net

loan amount will increase by EUR7bn in 2014. Stimulus to support the

economy is unlikely although there are more voices backing greater

government action as the elections are closer. All in all, the debt continues to

grow in the absence of growth. This is to be expected as cyclical expenditures

increase and the tax base shrinks.

The main challenge in public finances lies in the long-term sustainability gap

as the ageing population begins to burden the healthcare system and limit the

growth potential. Thus, the structural reforms initiated in the autumn 2013

are crucial to increase the labour force participation rate and labour

productivity (see ‘Research Finnish economy: Focus on structural reforms’,

30 August 2013). How these reforms will be enacted is still unclear. The

expectation is that details will be published and concrete legislation will be

passed before 2015. These measures, if properly implemented, could turn the

debt ratio into a decline after 2015.

The forthcoming EU-wide revision of national accounts (ESA 2010) will lift

reported GDP and thus keep the debt ratio lower than otherwise from July

2014 onwards, when the new statistical method is adopted. The revision will

count R&D expenditure as investment, which will raise GDP by 4.2% in

Finland and as a side effect, lower the debt ratio by 2 percentage points.

We forecast the debt ratio to be 59% in 2014 and to reach 61% by the end of

2015 even with the new method.

Public consumption increased by 0.8% in 2013 but this was mainly due to

changes in the calculation of expenses in the public broadcasting.

As this one-time effect vanishes and tight budgets continue, public spending

is expected to stay nearly flat in coming years. Even though Finland is one of

the least indebted euro area countries, support for expansionary public

finances is low. The remaining space for fiscal expansion is being reserved as

a buffer against major shocks and future demographic changes.

Within the euro area, the Republic of Finland continues to enjoy one of the

lowest risk premiums compared to Germany. The 10-year bond yield is only

1.6%. The triple-A rating from all three major credit rating agencies

underlines the strength and confidence in the public finances.

We expect the fairly low level of public debt, excellent track record and

policy decisions to continue to keep the Finnish risk premium low, interest

rates low and credit ratings high.

http://danskeanalyse.danskebank.dk/abo/ResearchFinland300813/$file/Research_Finland_300813.pdf


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Labour force decreasing

The official employment figures remained stable for the first months of 2014.

According to Statistics Finland, the seasonally-adjusted unemployment rate

was 8.5% in April. However, the official figure understates the poor labour

market conditions, as people are giving up on looking for work, which can be

seen in the shrinking labour force and the increasing share of inactive

population. Also, the number of registered unemployed at the employment

and economic development offices has continued to increase in recent

months. In addition, news of new lay-offs has been persistent and according

to surveys, intentions to hire new workers are sluggish in almost all

industries. At the same time, new vacancies are decreasing which will not

lure discouraged workers back to the labour force.

We forecast the unemployment rate to stay around 8.5% in 2014-15. Slowly

improving economic growth, low wage hikes and increasing retirement will

finally turn the unemployment into a decline. As the economic and labour

market conditions improve, part of the population now outside of the labour

force will return to seek jobs, keeping the unemployment rate over 8% for

longer. The retirement wave which started in 2010 will continue and the

working age population will decrease until the 2020s. This trend will put a

ceiling on the number of employed persons and dampen the growth potential

markedly.

Unemployment rate to stay above 8%

Source: Macrobond


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Finland: Forecast at a glance

Source: Danske Bank

ForecastNational accounts 2011 2012 2013 2014 2015

GDP 2.8 -1.0 -1.4 -0.2 1.5Imports 6.2 -0.7 -1.8 0.0 2.5Exports 2.8 -0.2 0.3 1.0 4.0Consumption 1.9 0.4 -0.3 0.2 0.2- Private 2.5 0.3 -0.8 0.1 0.5- Public 0.5 0.5 0.8 0.3 0.0Investments 5.8 -0.8 -4.6 -2.5 2.5

Key Performance Indicators 2011 2012 2013 2014 2015

Unemployment rate, % 7.8 7.7 8.2 8.5 8.4Earnings, % 2.7 3.2 2.2 1.2 1.2Inflation, % 3.4 2.8 1.5 1.0 1.2Housing prices, % 2.7 1.7 1.6 -0.5 0.5Current account, Bn, EUR -2.8 -2.7 -2.1 -1.5 -1.0Current account/GDP, % -1.5 -1.4 -1.1 -0.7 -0.5Public deficit/GDP, % -0.7 -1.8 -2.1 -1.8 -1.5Public debt/GDP, % 49.3 53.6 57.0 59.0 61.0

Financial figures + 3 mths + 6 mths + 12 mths

Repo rate, % 0.15 0.15 0.15 0.152 year swap rate 0.33 0.25 0.25 0.2510 year swap rate 1.51 1.60 1.70 1.95EUR/USD 1.36 1.33 1.30 1.26

Volume, y-o-y %

24/06/2014


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Global overview

The sky is clearing

The global recovery is gaining speed again following a soft spot

earlier this year. The US and China have reaccelerated and the

European recovery continues to unfold although manufacturing is

hitting a soft patch.

Looking ahead, we look for robust global growth in H2 above 4%

with all regions pulling. The positive momentum is expected to

continue into 2015. Our forecasts are slightly above consensus and we

still see Europe as the main candidate for a positive surprise due to

the large amount of pent-up demand and renewed monetary stimulus.

Risks to global growth are generally seen as low as emerging markets

have stabilised. The main risk is a repeat of a strong rise in US yields

as seen in 2013, which could lead to another soft patch.

Inflation is expected to rise gradually from here as global food prices

have increased and falling unemployment will ease the downward

pressure on wage growth. Central banks will keep monetary policy

very accommodative for a long time. This is good for growth but

poses the risk of creating new asset bubbles down the road.

Temporary headwinds are easing

We now have clear signs that the global economy is reaccelerating following

a weak start to the year in both the US and China.

There were three main factors behind the slowdown in the US. First, a

very harsh winter kept consumers inside and added to softness in housing.

Second, inventories started out at a high level keeping production subdued.

Third, the housing market slowed following the sharp rise in mortgage rates

in 2013, which typically works with a lag of six-nine months.

However, all of these headwinds have either stopped or are easing. The

weather effect is over now, the inventory imbalance has eased and the drag

on housing from higher financing costs is slowly reversing as mortgage rates

have declined again. This puts the US recovery on a stronger footing in H2

supported by strong fundamentals: the fiscal drag continues to fade, wealth

gains are very robust, job growth is picking up and real wage growth is

supported by subdued inflation. Also, visibility is the best in a long time as

political uncertainty has declined on both sides of the Atlantic. As a

consequence, businesses are starting to increase investment and hiring and

consumers are spending more. The positive momentum in growth in H2 is

expected to carry over into 2015 where we look for US growth to reach 3.5%.

In China, policymakers have stepped on the gas lately spurring a

moderate recovery. We expect this to continue over the summer and look

for growth around 8% annualised in H2 before moderating again to the

government’s target of 7.5%. Subdued inflation and a cooler housing market

have given the Chinese authorities some leeway to stimulate growth. The

main risk in China continues to be financial instability due to the sharp build-

GDP outlook: Above consensus

Source: Danske Bank Markets, Bloomberg

US picking up speed again

Source: Danske Bank Markets, Macrobond Financial

China recovering moderately after weak Q1

Source: Macrobond Financial, Danske Bank Markets

% y/yD anske B ank C o nsensus D anske B ank C o nsensus

USA 2,2 2,2 3,4 3,0

Euro area 1,2 1.1 1.9 1.5

Japan 1.7 1,5 1.1 1,2

China 7,4 7,3 7,3 7,2

Global 3,6 3,5 4,1 3,9

2014 2015


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up of debt in certain sectors and regions. However, overall we believe China

will be able to manage the situation without a system crisis as growth is

supported by rising productivity and China has high savings as a buffer to

potential high losses from non-performing loans.

We still see scope for positive surprises

in Europe

In Europe, the recovery continues to unfold. A very positive development

is the improvement in private consumption. Consumers are now the most

optimistic since 2007 as a the low inflation has given a lift to purchasing

power and unemployment has started to move lower. Uncertainty has been

reduced substantially since the euro crisis ended and the recovery has started

with substantial pent-up demand, which is now slowly being unleashed. We

continue to see potential for upside surprises in the euro area in coming years.

The manufacturing sector is currently hitting a soft patch as exports are

suffering from the weak growth in China and US at the start of the year.

However, this should soon reverse as both countries are regaining speed. The

recent stimulus from the ECB will help to gradually freeze up credit flows,

which is likely to take the recovery to the next level in 2015 where we look

for growth of 1.9% after 1.2% in 2014.

Especially Spain, Ireland Portugal and Greece are surprising on the

upside and have potential for more surprises. These are the countries

where the negative shock hit the hardest; therefore, also where the relief is

the biggest and pent-up demand the highest. The weak link in Europe is

France where house prices are still overvalued and competitiveness is poor.

The UK continues to be the star performer of Europe as the economy

has entered a virtuous cycle where rising house prices and strong job gains

are supporting consumer spending and spurring investments. Although

unemployment has fallen sharply, wage pressures are still moderate, leaving

the Bank of England with patience before raising rates. Macro-prudential

measures to put a dent on the housing market could come very soon though

and are also advisable to avoid another housing bubble from building.

Japan is currently hitting a weak spot following the VAT hike in April.

However, in the context of a global reacceleration, this should prove

temporary and we look for growth to pick up again in Q4.

The list of risk factors is getting smaller

EM have for some time been the biggest risk factor for the global economy as

we have seen several bouts of instability over the past year. However, the

depreciation of many EM currencies in combination with restraint on

domestic demand has helped to repair external imbalances in countries

such as India and Indonesia – two of the big EMs. The weak spots continue

to be Brazil and Russia but things seem to be stabilising here as well. Turkey

and South Africa still have substantial imbalances but they are very small

economies in the grand scheme of things. The risk of a negative outcome in

the Russia/Ukraine crisis has also diminished recently although uncertainty is

still in place regarding this conflict. An escalation with renewed sanctions

could hurt European growth in particular.

Euro recovery gradually strengthening


Euro area consumers getting uplifted

Source: Danske Bank Markets, Macrobond Financial

EM markets supported by Chinese growth

Grey bars show bottoms in China PMI and EM stocks



No

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Nordic Outlook

Overall, though, the risk picture is improving for the global economy and

the main risk factor now seems to be another sharp rise in US bond yields.

During H2, we expect to see an intensified discussion about the timing of the

first rate hike, which may be a small wake-up call for the markets. If there is

overshooting again, it could cause another soft patch in global growth and

lead to uncertainty in EM markets. However, this is not our main scenario.

Inflation bottoming, central banks stay

accommodative

Inflation reached very low levels in not least the euro area but also the US in

H1 this year. A long period of declining commodity prices and subdued wage

growth are the main factors behind the low inflation. However, we believe

inflation is currently bottoming: first, food prices on world markets have

risen around 25% since the beginning of the year, which will likely feed into

global consumer price inflation during Q3 and Q4. Second, as unemployment

declines the downward pressure on wage inflation will slowly fade. Third,

pricing power will improve as the recovery strengthens. We already see signs

that US core inflation has bottomed and we expect inflation to move towards

the Fed’s 2% target over the next year. In the euro area, we look for inflation

to stay very low around 0.5% in the short term but to increase in Q4. The

deflation scare should thus ease a bit. In China, we see some temporary

upside risk to inflation from food in H2 (food is a third of consumer basket).

Central banks are generally expected to keep monetary policy very

accommodative. The ECB has just launched substantial further stimulus and

has solid forward guidance in place indicating rates will stay at zero for at

least a couple of years. The Bank of Japan may have to step even further on

the accelerator in late summer to get inflation higher. The Fed will not start

raising rates until the middle of next year, in our view. While positive for

growth, it leaves concern over the creation of new bubbles. Most assets are

already in expensive territory and with the combination of robust growth and

zero rates in the next couple of years, the risk of new bubbles is quite high.

Macro-prudential measures are needed to avoid these from building.

Euro inflation to stay subdued for long time but should

rise gradually in H2


US inflation and unemployment closing in on Fed goals,

Fed to hike rates no later than mid-2015



No

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Nordic Outlook

Economic forecast

Source: OECD and Danske Bank. 1) % y/y. 2) % contribution to GDP growth. 3) % of labour force. 4) % of GDP.

Macro forecast, Scandinavia

Denmark 2013 0.4 0.0 0.8 0.7 0.2 1.2 1.7 0.8 5.8 -0.9 44.5 7.32014 1.5 1.6 0.7 2.3 -0.1 3.2 3.1 0.7 5.0 -1.2 42.7 6.62015 2.0 1.7 0.8 3.2 0.0 3.8 3.4 1.4 4.6 -2.9 43.5 5.8

Sweden 2013 1.6 2.0 2.0 -1.1 0.1 -0.4 -0.8 0.0 8.0 -1.2 40.5 6.82014 2.3 2.3 1.0 7.7 0.0 3.8 5.6 -0.2 8.0 -1.6 41.2 6.02015 2.8 2.5 1.4 6.9 -0.1 5.5 6.4 1.2 7.9 -1.3 40.8 5.5

Norway 2013 2.0 2.2 1.8 8.5 0.0 -3.3 2.7 2.1 3.5 - - -2014 2.2 2.0 2.0 0.6 -0.2 0.7 1.9 2.2 3.5 - - -2015 2.2 2.3 2.0 -1.3 0.1 1.0 4.5 2.2 3.6 - - -

Macro forecast, Euroland

Euroland 2013 -0.4 -0.6 0.1 -2.8 -0.1 1.5 0.4 1.4 12.0 -3.0 95.0 2.62014 1.2 0.7 0.5 2.7 0.1 3.7 3.9 0.6 11.6 -2.5 95.9 2.92015 1.9 1.4 0.4 4.0 0.0 4.7 4.5 1.1 11.2 -2.2 95.2 2.9

Germany 2013 0.5 1.0 0.4 -0.7 0.2 1.1 1.6 1.6 5.3 0.0 78.4 7.42014 2.5 1.4 0.6 6.7 -0.1 4.4 5.5 0.8 5.1 0.0 76.0 7.32015 3.1 1.9 0.6 6.8 0.0 5.3 4.8 1.4 5.1 -0.1 73.6 7.0

France 2013 0.4 0.4 1.9 -0.8 0.0 2.4 1.9 1.0 10.3 -4.3 93.5 -1.92014 0.8 0.3 1.0 0.1 0.0 3.8 4.0 0.8 10.4 -3.9 95.6 -1.82015 1.5 1.4 -0.1 4.0 0.0 4.8 4.5 1.0 10.2 -3.4 96.6 -2.0

Italy 2013 -1.8 -2.6 -0.8 -4.6 -0.6 0.0 -2.9 1.3 12.2 -3.0 132.6 0.92014 0.4 0.2 0.6 -0.1 0.3 3.8 1.9 0.5 12.6 -2.6 135.2 1.52015 1.8 1.2 0.3 3.3 0.0 4.5 3.7 1.1 12.1 -2.2 133.9 1.5

Spain 2013 -1.2 -2.1 -2.3 -5.1 0.0 4.9 0.4 1.5 26.1 -7.1 93.9 0.82014 1.1 1.5 1.4 0.9 0.0 3.8 5.0 0.2 25.5 -5.6 100.2 1.42015 1.9 1.6 -0.2 3.8 0.0 4.8 4.2 0.8 24.0 -6.1 103.3 1.5

Finland 2013 -1.4 -0.8 0.8 -4.6 - 0.3 -1.8 1.5 8.2 -2.1 57.0 -1.12014 -0.2 0.1 0.3 -2.5 - 1.0 0.0 1.0 8.5 -1.8 59.0 -0.72015 1.5 0.5 0.0 2.5 - 4.0 2.5 1.2 8.4 -1.5 61.0 -0.5

Macro forecast, Global

USA 2013 1.9 2.0 -0.6 4.5 -0.4 2.7 1.4 1.1 7.4 -4.1 72.0 -2.32014 2.2 3.0 0.0 3.7 -0.3 3.8 4.2 1.5 6.3 2.9 74.0 -2.22015 3.4 3.5 1.0 7.3 0.0 7.8 8.6 1.9 5.9 -2.6 73.0 -2.9

Japan 2013 1.5 2.0 2.0 0.2 -0.3 1.6 3.4 0.2 4.0 -8.4 243.0 0.72014 1.7 1.6 0.8 9.0 -0.4 8.1 10.6 2.7 3.6 -7.2 244.0 1.22015 1.1 0.4 0.7 0.0 -0.4 6.7 6.9 2.1 3.4 -6.4 245.0 1.3

China 2013 7.7 - - - - - - 2.6 4.3 -1.9 22.8 2.02014 7.4 - - - - - - 2.6 4.3 -2.2 21.3 2.22015 7.3 - - - - - - 3.1 4.2 -2.0 30.0 2.6

UK 2013 1.7 2.2 0.7 -0.6 0.1 1.0 0.5 2.6 7.6 -4.5 89.7 -3.32014 3.0 2.5 0.9 6.9 4.9 1.3 0.5 1.8 6.6 -3.5 94.9 -2.72015 2.5 2.2 -0.3 8.4 0.0 4.7 4.4 1.8 6.1 -1.9 96.6 -2.2

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Current

acc.4

Im-

ports1

Public

debt4

Public

budget4

Ex-

ports1

Infla-

tion1

Unem-

ploym.3

Ex-

ports1

Im-

ports1

Infla-

tion1

Unem-

ploym.3

Public

budget4

Current

acc.4

Public

debt4

Unem-

ploym.3

Public

budget4

Public

debt4

Year

Year GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Current

acc.4

GDP 1

Private

cons.1

Public

cons.1

Fixed

inv.1

Stock

build.2

Ex-

ports1

Im-

ports1

Infla-

tion1


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Nordic Outlook

Financial forecast

Source: Danske Bank

Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 24-Jun - 548.0

+3m - 561

+6m - 574+12m - 592

EUR 24-Jun 136.1 745.5

+3m 133 746.0

+6m 130 746.0+12m 126 746.0

JPY 24-Jun 102.0 5.37

+3m 105 5.33

+6m 110 5.22+12m 114 5.18

GBP 24-Jun 170.3 933.1

+3m 171 956

+6m 169 969+12m 166 982

CHF 24-Jun 89.4 612.8

+3m 92 611

+6m 95 607+12m 98 602

DKK 24-Jun 548.0 -

+3m 561 -

+6m 574 -+12m 592 -

SEK 24-Jun 670.1 81.8

+3m 669 83.8

+6m 677 84.8+12m 690 85.7

NOK 24-Jun 610.8 89.7

+3m 602 93.3

+6m 612 93.8+12m 623 95.0

Equity Markets

Regional

Price trend12 mth.

Regional recommen-dations

USA Corporate earnings surprise 5%-10% Mild overweight

Emerging markets (USD) Uncertainty has hit Asia 5%-10% Underweight

Europe (ex. Nordics) (EUR) Recovering economy, attractive valuation 5%-10% Mild overweightNordics Strong cyclical profile 5%-10% Mild overweight

Commodities

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015

NYMEX WTI 99 103 103 97 96 95 94 94 100 95

ICE Brent 108 109 107 101 100 99 98 98 106 99

Copper 6,996 6,750 6,825 6,900 6,975 7,050 7,150 7,250 6,868 7,106

Zinc 2,024 2,060 2,110 2,130 2,140 2,150 2,160 2,170 2,081 2,155

Nickel 14,723 18,500 19,500 19,900 20,100 20,300 20,500 20,700 18,156 20,400

Aluminium 1,754 1,830 1,930 1,950 1,960 1,970 1,980 1,990 1,866 1,975

Gold 1,292 1,285 1,245 1,220 1,210 1,200 1,190 1,180 1,260 1,195

Matif Mill Wheat (€/t) 201 200 192 200 206 210 211 213 198 210

Rapeseed (€/t) 383 375 338 349 360 365 368 370 361 366

CBOT Wheat (USd/bushel) 618 660 620 635 645 655 660 665 633 656

CBOT Corn (USd/bushel) 453 485 460 475 485 495 500 505 468 496CBOT Soybeans (USd/bushel) 1,358 1,475 1,300 1,320 1,340 1,360 1,370 1,380 1,363 1,363

351

Average

Key int.rate

0.25

0.25

0.250.25

1.50

0.00

0.15

0.15

0.100.10

0.50

10-yr swap yield

0.83

0.20

0.200.20

3m interest rate

1.75

0.15

0.10

0.50

0.00

0.20

0.10

0.54

0.551.10

0.000.00

0.15

0.50

0.70

0.75

0.10

0.37

0.00

1.00

0.000.00

0.30

0.32

0.30

0.70

0.70

1.50

0.50

0.500.50

1.50

1.50

1.75

1.75

0.23

0.21

0.13

0.55

0.01

0.25

0.270.80

0.12

0.10

0.20

0.15

0.20

2.10

2.35

0.85

2.65

0.85

1.841.76

0.49

0.500.50

0.05

0.100.15

0.83

0.85

1.051.65

1.35

1.552.15

0.20

0.250.25

136.1

-

-

--

138.8

746

746746

911.7

831.0

785

890

795

880870

800

121.7

745.5

78.0

77.076.0

122

123124

133

130126

140

143144

Medium

Medium

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Medium 5%-10%

Price trend3 mth.

2.80

2.70

3.10

0.62

0.33

0.17

1.35

0.07

0.59

0.25

0.250.25

0.70

79.9

3.40

443

24-Jun

5%-10%

5%-10%

106

18,425

6,885

2,184

1,316

189

114

1,890

20152014

Medium 5%-10%

1.60

1.701.95

0.85

0.900.95

2.83

2.90

0.73

1,414

576

1.51

2.352.55

2.91

3.00

3.10

3.103.40

1.06

1.25

1.251.35

3.25

2.002.25

1.90

2.14

2.25

1.82


No

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Nordic Outlook

Disclosures

This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The authors of this research report are listed on page 2.

Analyst certification

Each research analyst responsible for the content of this research report certifies that the views expressed in this research report accurately reflect the research analyst’s

personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation

of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report.

Regulation

Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all

other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority

(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request.

The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish

Securities Dealers Association.

Conflicts of interest

Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence.

These procedures are documented in Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any request that

might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank’s Research Departments

are organised independently from and do not report to other business areas within Danske Bank.

Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other

remuneration linked to specific corporate finance or debt capital transactions.

Financial models and/or methodology used in this research report

Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual

security, issuer and/or country. Documentation can be obtained from the authors on request.

Risk warning

Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text.

Expected updates

Nordic Outlook is a quarterly forecast but new statistical data may give rise to changes in our views on individual economies.

Date of first publication

See the front page of this research report for the date of first publication.

General disclaimer

This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part

of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial

instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such

financial instruments) (‘Relevant Financial Instruments’).

The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable

care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and

subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report.

The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions

are subject to change and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the

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U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission.

D a n s k e B a n k , D a n s k e R e s e a r c h , H o l m e n s K a n a l 2 - 1 2 , D K - 1 0 9 2 C o p e n h a g e n K . P h o n e + 4 5 4 5 1 2 0 0 0 0 w w w. d a n s k e r e s e a r c h . co m

N o r way

C h i e f A n a l y s t & H e a d of F r a n k J u l l u m+ 4 7 8 5 4 0 6 5 4 0f j u @ f o k u s . n o

F i N l a N d

C h i e f A n a l y s t & H e a d of P a s i P e t te r i K u o p p a m ä k i+ 3 5 8 ( 0 ) 1 0 5 4 6 7 7 1 5p a s i . k u o p p a m a k i @ d a n s k e b a n k . c o m

J u h a n a B r oth e r u s+ 3 5 8 ( 0 ) 1 0 5 4 6 7 1 5 9j u h a n a . b r oth e r u s @ d a n s k e b a n k . c o m

i N t e r N at i o N a l M a c r o

C h i e f A n a l y s t & H e a d of A l l a n v o n M e h r e n + 4 5 4 5 1 2 8 0 5 5a l v o @ d a n s k e b a n k . d k

S i g n e P. R o e d - F r e d e r i k s e n ( o n l e a v e )+ 4 5 4 5 1 2 8 2 2 9s r o e @ d a n s k e b a n k . d k

F l e m m i n g J e g b j æ r g N i e l s e n + 4 5 4 5 1 2 8 5 3 5f l e m m @ d a n s k e b a n k . d k

P e r n i l l e B o m h o l d t N i e l s e n+ 4 5 4 5 1 3 2 0 2 1p e r n i @ d a n s k e b a n k . d k

F i x e d i N c o M e r e s e a r c h

C h i e f A n a l y s t & H e a d of A r n e L o h m a n n R a s m u s s e n + 4 5 4 5 1 2 8 5 3 2a r r @ d a n s k e b a n k . d k

J e n s P e te r S ø r e n s e n+ 4 5 4 5 1 2 8 5 1 7 j e n s s r @ d a n s k e b a n k . d k

C h r i s t i n a E . Fa l c h + 4 5 4 5 1 2 7 1 5 2c h f a @ d a n s k e b a n k . d k

J a n We b e r Ø s te r g a a r d+ 4 5 4 5 1 3 0 7 8 9j a s t @ d a n s k e b a n k . d k

A n d e r s M ø l l e r L u m h o l t z+ 4 5 4 5 1 2 8 4 9 8a n d j r g @ d a n s k e b a n k . d k

H a n s R o a g e r J e n s e n+ 4 5 4 5 1 3 0 7 8 9h r o a @ d a n s k e b a n k . d k

r at e s , F x & c o M M o d i t i e s

s t r at e g y

C h i e f A n a l y s t & H e a d of A r n e L o h m a n n R a s m u s s e n + 4 5 4 5 1 2 8 5 3 2a r r @ d a n s k e b a n k . d k

C h r i s t i n K y r m e Tu x e n ( o n l e a v e )+ 4 5 4 5 1 3 7 8 6 7tu x @ d a n s k e b a n k . d k

P e te r P o s s i n g A n d e r s e n + 4 5 4 5 1 3 7 0 1 9p a @ d a n s k e b a n k . d k

L a r s Tr a n b e r g R a s m u s s e n+ 4 5 4 5 1 2 8 5 3 4 l a r a s @ d a n s k e b a n k . d k

M o r te n T h r a n e H e l t+ 4 5 4 5 1 2 8 5 1 8m o h e l @ d a n s k e b a n k . d k

A n d e r s Ve s te r g å r d F i s c h e r+ 4 5 4 5 1 3 6 6 4 1a f i s @ d a n s k e b a n k . d k

J e n s N æ r v i g P e d e r s e n + 4 5 4 5 1 2 8 0 6 1j e n p e @ d a n s k e b a n k . d k

c r e d i t r e s e a r c h

C h i e f A n a l y s t & H e a d of T h o m a s M a r t i n H o v a r d+ 4 5 4 5 1 2 8 5 0 5 h o v a @ d a n s k e b a n k . d k

L o u i s L a n d e m a n+ 4 6 8 5 6 8 8 0 5 2 4l l a n @ d a n s k e b a n k . s e

J a ko b M a g n u s s e n + 4 5 4 5 1 2 8 5 0 3j a k j a @ d a n s k e b a n k . d k

M a d s R o s e n d a l+ 4 5 4 5 1 4 8 8 7 9m a d r o @ d a n s k e b a n k . d k

G a b r i e l B e r g i n+ 4 6 8 5 6 8 8 0 6 0 2g a b e @ d a n s k e b a n k . s e

B r i a n B ø r s t i n g+ 4 5 4 5 1 2 8 5 1 9b r b r @ d a n s k e b a n k . d k

L a r s H o l m+ 4 5 4 5 1 2 8 0 4 1l a h o @ d a n s k e b a n k . d k

K a s p e r F r o m L a r s e n+ 4 5 4 5 1 2 8 0 4 7k a s l a @ d a n s k e b a n k . d k

Å s e H a a g e n s e n + 4 7 2 2 8 6 1 3 2 2h a @ d a n s k e b a n k . c o m B j ø r n K r i s t i a n R ø e d+ 4 7 8 5 4 0 7 0 7 2b r e d @ d a n s k e b a n k . co m

Wi v e c a S w a r t i n g+ 4 6 8 5 6 8 8 0 6 1 7w s w @ d a n s k e b a n k . c o m

N i l s H e n r i k A s p e l i+ 4 7 8 5 4 0 8 4 3 3n a s @ d a n s k e b a n k . co m

S v e r r e H o l b e k+ 4 5 4 5 1 4 8 8 8 2h o l b @ d a n s k e b a n k . d k

S ø r e n S ko v H a n s e n + 4 5 4 5 1 2 8 4 3 0

d e N M a r k

C h i e f E c o n o m i s t & H e a d of S te e n B o c i a n+ 4 5 4 5 1 2 8 5 3 1s tb o @ d a n s k e b a n k . d k

L a s O l s e n + 4 5 4 5 1 2 8 5 3 6l a s o @ d a n s k e b a n k . d k

M i k a e l O l a i M i l h ø j+ 4 5 4 5 1 2 7 6 0 7m i l h @ d a n s k e b a n k . d k

s w e d e N

C h i e f A n a l y s t & H e a d of M i c h a e l B o s tr ö m+ 4 6 8 5 6 8 8 0 5 8 7m b o s @ c o n s e n s u s . s e

R o g e r J o s e f s s o n+ 4 6 8 5 6 8 8 0 5 5 8 r j o s @ c o n s e n s u s . s e

M i c h a e l G r a h n + 4 6 8 5 6 8 8 0 7 0 0m i k a @ c o n s e n s u s . s e

C a r l M i l to n+ 4 6 8 5 6 8 8 0 5 9 8c a r m i @ c o n s e n s u s . s e

M a r c u s S ö d e r b e r g+ 4 6 8 5 6 8 8 0 5 6 4m a r s d @ c o n s e n s u s . s e

S te f a n M e l l i n+ 4 6 8 5 6 8 8 0 5 9 2m e l l @ c o n s e n s u s . s e

S u s a n n e P e r n e b y+ 4 6 ( 0 ) 8 - 5 6 8 8 0 5 8 5s u p e @ d a n s k e b a n k . s e

Global Danske ReseaRch

e M e r g i N g M a r k e t s

C h i e f A n a l y s t & H e a d of L a r s C h r i s te n s e n+ 4 5 4 5 1 2 8 5 3 0l a r c h @ d a n s k e b a n k . d k

S ta n i s l a v a P r a d o v a + 4 5 4 5 1 2 8 0 7 1s p r a @ d a n s k e b a n k . d k

Vi o l e ta K l y v i e n e+ 3 7 0 6 1 1 2 4 3 5 4v k l y @ d a n s k e b a n k . d k

V l a d i m i r M i k l a s h e v s k y + 3 5 8 ( 0 ) 1 0 5 4 6 7 5 2 2v l m i @ d a n s k e b a n k . co m

Nordic Outlook - Danske Bank · 2014. 6. 25. · Nordic Outlook 4 | 25 June 2014 k Denmark Recovery...

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Transcript of Nordic Outlook - Danske Bank · 2014. 6. 25. · Nordic Outlook 4 | 25 June 2014 k Denmark Recovery...