Economic and financial trends - Danske Bank · economy could be hit extra hard via falling house prices. House prices are being very much supported by extremely low interest rates

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Investment Research

24 September 2015

Nordic OutlookEconomic and financial trends

� Denmark: Global turbulence takes shine off recovery - Recovery set to continue but at a slower pace than previously forecast

� Sweden: Exports slowly taking over - Domestic economy likely to cool a bit

� Norway: Slower growth, no recession - The oil sector is a drag but the economy is robust

� Finland: Reforms ahead - New government to increase growth potential but tightening in the short term

2 | 25 September 2015 www.danskeresearch.com

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Analysts

Editorial deadline 23 September 2015 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]

Mark Thybo Naur Denmark +45 45 12 85 26 [email protected]

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

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

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

Henna Mikkonen Finland +358 (0) 10 546 6619 [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 35 of this report.

http://www.danskebank.dk/analyse

http://www.danskebank.dk/analyse


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Contents

Nordic Outlook At a glance 4

Denmark Global turbulence takes shine off recovery 6

Forecast at a glance 11

Sweden Exports slowly taking over 12


Norway Slower growth, no recession 20


Finland Reforms ahead 25


Global overview Emerging Markets the weak link 32

Economic forecast 33

Financial forecast 34

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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Nordic Outlook

At a glance

Promising outlook

The Nordic countries are well positioned to benefit from the pick-up in the

European and global economies. Strong Swedish and Finnish firms in the

capital goods sector have long been waiting for manufacturing companies

abroad to again have the need and the resolve to increase investment – and

that is now looking likely. Across the Nordics, but especially in Norway,

companies have had their competitiveness boosted by weaker currencies.

Denmark and Finland do not, of course, enjoy the same degree of exchange

rate flexibility, but nevertheless are benefiting from a weaker euro, and have

also increased competitiveness via low wage growth – a process that now

looks set to be accelerated in Finland through political reforms.

It is therefore unfortunate for the Nordic countries that global economic

uncertainty has recently increased. The slowdown in China and other

emerging markets has dampened short-term growth expectations in Europe

generally and thus also in the Nordic countries. This has caused us to lower

our growth outlook for Denmark and Finland, while Norway will be hit extra

hard, as the slowdown and financial turmoil have also resulted in a lower oil

price and therefore reduced expectations for investment in energy extraction.

We have also lowered our export expectations for Sweden, though Swedish

exports have in fact performed surprisingly well this year – and this together

with a number of other upward adjustments means our growth outlook for

Sweden has actually improved.

Overall, the cuts to our forecasts are on a scale that does not much affect the

rather promising outlook for the Nordic countries. We expect to see decent

growth and growing employment in Denmark, Sweden and Norway in 2016,

while Finland looks set to see growth return after a four-year absence, with

the prospect of a sustainable recovery materialising in the following years.

With external risks…

Right now there is significant uncertainty as to how deep and long China’s

slowdown might be, while many other emerging markets are also under

pressure as a US rate hike draws ever closer. The situation could potentially

turn out worse than expected, which would be unfortunate for the Nordic

economies, as they all depend on exports as a growth driver. This could feed

through to the oil price, which would be an additional negative for Norway.

On the other hand, the recovery in Europe could gather pace, which would of

course be positive, especially for Denmark.

…and internal risks alike

The Nordic countries have healthy public finances and run current account

surpluses, so there is no risk of a southern European-style debt crisis

developing in the Nordic region. Nevertheless, economic imbalances could

materialise, with the housing market being a prime suspect. Developments in

Denmark since 2008 clearly show how falling house prices can trigger an

economic slump via declining consumption and investment, even if only

Decent growth outlook for Nordic region

Source: National statistics offices, Danske Bank Markets

Less bright outlook for Europe

Source: Eurostat and Danske Bank Markets

Exposure to emerging markets (non-EU)

Source: National statistics offices, Finnish Customs


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relatively few homeowners actually default on their debt. The most obvious

risk is Sweden, where we expect house prices to fall in 2016. Swedish

households have a very strong economy overall though, so a modest fall in

house prices is unlikely to trigger any real economic setback – the risk is the

fall will not be modest. Norwegian house prices have also appreciated

strongly. However, much of that appreciation can be explained by substantial

income growth, and as such is not particularly worrying. Nevertheless,

should incomes tumble as a result of the low oil price, the Norwegian

economy could be hit extra hard via falling house prices.

House prices are being very much supported by extremely low interest rates

and that will not change any time soon. In fact, we expect to see further

monetary policy easing in Sweden, where inflation again looks set to

undershoot the Riksbank’s projections. In Norway, Norges Bank cut the key

policy rate from 1.00% to 0.75% on 24 September. The Danish central bank

is likely to hike rates, in our view, but to levels that remain below policy rates

in the euro zone – and we do not expect the ECB to raise its rates until well

into 2017, at the earliest.

However, several years of very low interest rates and quite decent economic

growth increase the risk of house prices rising dramatically – and then falling

again when interest rates eventually begin to go up. New lending rules in

Sweden should curb house price growth from next year but their impact is

uncertain. Striking the right balance with this type of macro-prudential

regulation is not easy – and would be particularly difficult in Denmark,

where concerns about developments at the local level could be justified in

certain areas, but not for the country as a whole.

Political stability

Political debate can become heated in the Nordic countries too and many

traditional parties are currently under pressure from new ones. However,

there is still a broad consensus across the Nordic countries that public

finances should be kept healthy not just for the immediate future but in the

long term too. The new government in Finland has even announced a

tightening of fiscal policy, which does not exactly match Finland’s current

economic situation but is designed to slow the growth of public debt.

Denmark too has a new government but the thrust of economic policy has

remained broadly unchanged – the outlook is for a nascent tightening of

fiscal policy, which is sensible given the state of the Danish economy, and

there is still a solid majority in favour of the budget rules and maintaining the

reforms designed to secure the long-term sustainability of public finances.

Sweden is even considering implementing further long-term consolidation

measures but will in any event also need to tighten up in 2016.

Extremely low policy rates

Source: National central banks

Low interest rates support house prices

Source: National statistics offices and Danske Bank Markets

Hot housing markets in Sweden

Source: National statistics offices

Fiscal tightening

Note: 2014 and 2015 data for Denmark adjusted for temporary

revenues.

Source: National statistics offices, Danske Bank Markets


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Denmark

Global turbulence takes shine off recovery

Lower growth abroad is likely to slow GDP growth slightly in Europe

and hence in Denmark. Nevertheless, the recovery is still in place,

with above-trend growth and rising employment.

While global developments pose a downside risk to our growth

outlook, we also see a risk of the Danish economy beginning to

overheat. Unemployment is not particularly high and our forecast

assumes an increase in the labour force, which is not certain to

materialise.

House price growth has slowed but has remained above the norm.

However, this does not appear to have prompted a rise in household

debt that could cause the economy to overheat. Nevertheless,

homebuyers should be aware of the risk of future price falls.

The Danish central bank looks set to hike rates but given the large

current account surplus, interest rates in Denmark should remain

lower than euro rates and thus very low for several years yet.

Private consumption appears to have recovered well after the dip in

Q2 and is being helped by lower oil prices. However, this is still not a

classic credit-driven consumption recovery.

Recovery set to continue

As we had expected, the Danish economy was a tad sluggish in Q2 15, even

though rising inventories and falling imports prevented an outright fall in

GDP. The economy faces further headwinds in the latter half of the year from

the slowdown in China and other emerging markets, which is affecting

Europe and thus Denmark. As a result, we have lowered our forecast for

exports and business investment and hence also GDP growth. We now expect

growth of 1.6% this year, rising to 1.9% next year.

However, this does not mean the recovery has run out of steam. The

weakness seen in Q2 15 was very much due to private consumption, which

appears to have righted itself. Moreover, further price falls in oil and other

commodities are positive for overall growth, if unhelpful for commodity

producers. We therefore expect GDP growth in Denmark to remain above

trend in the coming years and employment to continue to rise. While the

outlook is for a slight tightening of fiscal policy and a minor rise in interest

rates, economic policy is likely to remain supportive of growth overall.

Hence, the risk picture is fairly balanced. On the one hand, global turbulence

may drag growth lower, while on the other capacity shortages and

overheating could occur in several areas in Denmark.

Changes from previous forecast

Source: Statistics Denmark, Danske Bank

Modest Danish recovery to continue


% y/y 2015 2016 2015 2016

GDP 1.6 1.9 1.7 2.1

Private consumption 2.0 2.1 1.9 1.9

Public consumption 1.2 0.2 1.0 0.3

Gross fixed investment 0.1 2.6 0.2 3.2

Exports 0.4 3.0 3.4 4.9

Imports -1.9 2.9 1.9 4.6

Gross unemployment (thousands) 124.2 116.8 125.1 116.8

Inflation 0.6 1.6 0.7 1.7

Government balance, % of GDP -1.9 -2.4 -1.0 -2.1

Current account, % of GDP 6.6 6.6 7.1 6.8

Current forecast Previous forecast


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Export outlook less bright than previously thought

We have turned slightly less optimistic on exports since our previous

forecast, as a strong comeback after a disappointing Q2 – when total exports

fell 2.2% – looks unlikely. Recent financial turbulence and slowdowns in

China and other emerging markets have sent tremors through the global

economy that are having a direct impact on Danish exports. We also fear

there could be a significant indirect effect on exports via other economies.

Danish goods exports to emerging markets (outside EU) have been rising and

now account for a little over 11% (3.6% of GDP) of total exports, pulled up

by China in particular, which is now Denmark’s sixth largest export market.

As we have become less positive on the European economies in H2 15, we

have also become less optimistic about Danish exports and hence the Danish

economy in H2. The Danish economy tends to track European economic

developments. This effect will not only be visible in exports but probably

also in investment growth, which is likely to come out lower than previously

estimated. However, we do not expect the recovery in Europe to be derailed

and so we still forecast Danish exports to grow in the coming quarters,

though not as strongly as we previously thought. It is not only Danish goods

exports that will be hit. Denmark is heavily involved in the maritime

transport of goods, which suffers when global trade slows. On the positive

side, although the trade-weighted DKK exchange rate has strengthened,

Danish exports are still being supported by a weak DKK that continues to

trade below its beginning-of-year level. Danish competitiveness has also been

boosted by wage growth being lower here than abroad over the past few

years. We thus expect export growth of 0.4% this year and 3.0% next year.

Consumption growth took a breather in Q2 15

Private consumption fell 0.5% in Q2. However, this does not appear to be the

start of a longer-lasting consumption slowdown – on the contrary, Dankort

(Danish debit card) sales indicate quite strong growth here in Q3. We have

therefore raised our private consumption forecast slightly based on

developments so far in 2015. A further decline in the price of oil should also

provide a tailwind for private consumption, while our less positive view on

overall economic growth in Denmark will pull a little in the opposite

direction.

Growing by around 2% annually, private consumption appears no longer

likely to pull overall economic growth down in Denmark. However, nor is

consumption set to be a powerful growth driver, such as we have seen in

previous recoveries. Despite rising employment, appreciating house prices,

low interest rates and very high consumer confidence, we have seen no

increase in household indebtedness. The explanation is presumably the

already high level of debt. Our forecast is based on consumption growing

apace with real income after pension contributions. Households have a large

savings surplus but that is largely accounted for by pension savings, so

financial savings apart from pension contributions are essentially zero.

Since bottoming in 2009, domestic private consumption has risen 4.8%,

primarily due to consumer durable sales. Car sales to private individuals, for

example, have risen by almost 38% corrected for price changes. Real car

consumption has in fact risen even more, as more private individuals now

lease cars. In terms of units sold, car sales are now above pre-crisis levels,

but the cars themselves are smaller and household spending on cars is thus

roughly 15% below pre-crisis levels including leasing.

Slowdown in global growth hits exports


Danish economy tracks Europe

Source: Statistics Denmark, Eurostat

A modest consumption recovery


More, but smaller cars



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Beware of bottlenecks in the labour market

Employment has been a bright spot in recent years and according to the

national accounts figures continued to grow in Q2 15, when employment rose

by a further 6,900 compared to Q1. GDP growth disappointed in Q2 but

employment is a sign that the underlying growth in the Danish economy has

continued. Since bottoming out in Q2 13, total employment has risen by close

to 50,000, driven mainly by private sector jobs growth. Private sector

employment doing so well despite just modest GDP growth is in part due to

GDP growth being held down by less labour-intensive industries, such as

commodity extraction. Hence, gross value added (GVA) in private sector

non-farm and non-oil industries has actually been positive every year since

2010.

We expect another 42,500 jobs to be created by the end of 2016 on the back

of a general pick-up in the economy. We assume that job growth will mainly

stem from the private sector but also expect public sector employment to rise

modestly, as this is assumed in the government’s economic policy. Rising

employment will cause gross unemployment to fall, albeit at a somewhat

slower pace than employment growth. That is not a bad thing, as it signals the

workforce is expanding on the back of improving job prospects and various

labour market reforms. We forecast gross unemployment to fall by a further

10,000 by the end of 2016. If we are correct, gross unemployment will stand

at 113,500 or 4.3% of the labour force by the end of next year, which is a

very low level of unemployment in historical terms. Employment growth

stemming from the labour force means an increased risk of labour market

bottlenecks, as it is not certain the labour force can be expanded sufficiently

significantly in such a short space of time without creating regional or

professional bottlenecks. Hence, labour market flexibility should be a key

focus area in the coming quarters and years. It is worth pointing out here that

the normal warning signals such as wage pressures and pressure on the

current account are less effective at a time when there is labour immigration

from the rest of Europe and a structural surplus on the current account.

Policy rates set to be very low for some time yet

Denmark and its EUR/DKK peg attracted an unaccustomed amount of

attention at the start of the year due to strong appreciation pressures. The

downward pressure on EUR/DKK prompted four rate cuts and intervention in

the FX market by Danmarks Nationalbank (DN) that lowered the certificates

of deposit rate to -0.75% and increased Denmark’s currency reserves to

almost 38.1% of GDP in February compared to 23.3% at the end of 2014.

The sale of government bonds (DGBs) was temporarily suspended. Pressure

began to ease in late February and DN bought DKK190bn between April and

August to support the DKK. Normally, intervention of DKK10-20bn in

support of the DKK would result in a unilateral Danish rate hike but the

current situation is by no means ordinary. Recent financial turmoil and

expectations of the ECB extending its QE programme mean DN will

probably prefer to reduce its currency reserves further before a rate hike

might be on the cards. Given the current FX outflow, we expect the

certificates of deposit rate to be raised twice over the next six months to

minus 0.55%. The short money market spread to the eurozone has, however,

already narrowed, which has functioned as an implied rate hike. Therefore, if

short money market rate spreads remain at current levels, DN may not even

need to raise the certificates of deposit rate or may need to raise it by less

than we expect – and even if we are correct, policy rates should remain

We still expect employment to rise


Labour shortages could soon be looming again


Growth in non-oil industries good for jobs


Currency reserve has been reduced

Source: Danmarks Nationalbank, Statistics Denmark


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extremely low and still far from the norm. Nevertheless, small steps have

been taken towards normalising monetary policy, as issuance of DGBs is set

to resume in October and banks’ current account limits have been reduced.

Extremely low interest rates have consequences, however. First, they help

push money into lending, as loans are cheap and the alternative to lending is

negative interest rates. Hence, credit growth should come under increasing

scrutiny in the coming years. Second, very low interest rates increase the risk

of unsustainable price rises or actual bubbles in, for example, the equity or

housing markets – and indeed there has been an increasing focus on the

housing market this year. It is less than 10 years since the Danish economy

last experienced a housing market collapse and record-low interest rates have

increased our concerns that we might again see strong price rises followed by

sharp falls, especially in the Copenhagen apartment market.

Low rates help push house prices higher

The housing market has accelerated this year – especially in Q1, when

interest rates were at their lowest – though house prices also appreciated in

Q2 and Q3, albeit at a somewhat slower pace when seasonally corrected. Our

view is that house prices should continue to grow in the coming quarters and

we estimate that the pace of growth could well pick up a little again. The

housing market is being supported by a general recovery in the economy and

the labour market, plus very low interest rates look unlikely to rise

significantly any time soon. However, as house prices have not continued to

grow at the pace we forecast in June, we have lowered our estimate and now

expect house prices to rise by 5.5% this year and 4.9% next year. Despite our

downward revision, the outlook is still for prices to rise by more than

nominal income growth would indicate, though we see no reason to fear a

bubble forming in the housing market, as prices have remained moderate.

This is also supported by the continued absence of growth in household

borrowing.

Another item of good news for the Danish economy is that the housing

market pick-up is no longer solely concentrated in and around the major

urban conurbations. According to the Housing Market Statistics, house prices

in all regions were higher in Q2 15 than in Q2 14. House prices are now

higher than last year in 83 of the 96 municipalities for which figures are

available. We expect the countrywide improvement to continue in the coming

years, though still with the Greater Copenhagen area as the main driving

force. However, while the situation is generally better in many parts of the

country, we would underline that some areas have remained very fragile,

with house prices still substantially below pre-crisis levels. Nevertheless,

housing market growth spreading to more parts of the country is positive for

the Danish economy, as the lacklustre housing market was a prime reason

why the crisis in Denmark ran as deep as it did.

Apartment prices have been rising particularly fast but figures from property

sales website ‘Boligsiden’ and estate agents ‘home’ indicate that price growth

slowed over the summer. Interest rate sensitivity is a major factor in the large

cities, so the slowdown was probably due to the increase in long rates.

Nevertheless, our view is that apartment market growth has simply taken a

break and that prices should continue to appreciate in the coming quarters, as

interest rates are still incredibly low and the large cities continue to attract a

substantial inflow of new residents.

Extremely low policy rates in Denmark

Source: Danmarks Nationalbank, Danske Bank

House prices set to rise further


Rising house prices not due to increased net

borrowing

Note: Data break September 2013

Source: Danmarks Nationalbank, Danske Bank

Housing market pick-up right across the country

Note: Bornholm not included in graph.

Source: DK Mortgage Banks’ Fed., Danske Bank


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Sharply increasing apartment prices this year have ignited debate on whether

we are witnessing a local housing market bubble. However, whether or not

that is the case can quickly become a theoretical discussion – what is

important for an ordinary homebuyer is not to take on too much debt, buy in

expectation of rising prices or be blinded by incredibly low interest rates. We

can certainly not rule out property prices starting to fall – especially in the

major towns and cities – in a few years’ time when interest rates begin to

normalise. If that happens, price falls could hit hard, regardless of whether or

not there has been an actual bubble.

Oil price pulled inflation lower

Falling oil and commodity prices in recent months have triggered a further

decline in inflation and prompted us to slightly adjust down our forecast.

Lower oil prices normally result in cheaper petrol prices very quickly but the

adjustment has been slow this time and so there is room for further falls in

petrol prices even though we expect oil prices to rise again. In 2016, oil

prices will probably pull total inflation up and with other temporary factors

falling out of the statistics, the outlook is for inflation to be significantly

higher next year, although it should remain low in historical terms. Private

sector wages grew by 0.5% in Q2 15 (seasonally adjusted), which was the

largest increase in four years. Wage growth could accelerate a little further in

2016 but truly high wage growth is probably still some way off.

Fiscal tightening on the cards

Denmark’s Ministry of Finance has lowered its estimate of the structural

budget so it now shows an expected deficit of 0.9% of GDP in 2015 and look

set to breach the 0.5% deficit limit in 2016 if no action is taken. Hence, the

government is duty-bound to tighten by at least 0.2% of GDP in 2016, which

will dampen economic growth by a similar amount. However, it is time to

tighten anyway, in our opinion. The economic risks have become more

balanced between overheating and a further crisis, which supports fiscal

policy not being as accommodative as absolutely possible – particularly

given that monetary policy is in practice tailored to the eurozone, where there

is clearly more surplus capacity than in Denmark. The actual budget deficit is

estimated to be DKK53.9bn this year, according to the government,

following a sharp downward revision to the expected proceeds from taxes on

pension yields. This is unduly pessimistic, in our view, both with respect to

pension yields and with respect to income from the conversion of lump sum

(capital) pensions. Some pension institutions have probably delayed

converting for as long as possible after the option was made available in

2013 – which means until 2015 as things stand now. However, we would

stress that the pension yield tax is very difficult to predict and in any case is a

one-off income and in the case of pension conversions actually an income

that comes at the expense of future tax revenues. Government debt will fall

sharply in 2015 due to the government drawing on its account at the Danish

central bank this year instead of issuing new bonds.

Apartment price growth has slowed

Source: Statistics Denmark, Boligsiden, home

Inflation heading higher


Budget deficit close to – but within – EU limit



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Denmark: Forecast at a glance

Sources: Statistics Denmark, Danish central bank (Danmarks Nationalbank), Macrobond Financial, Danske Bank

National account 2013 2013 2014 2015 2016

DKK bn (current prices)

Private consumption 890.2 0.0 0.8 2.0 2.1

Government consumption 504.0 -0.5 0.2 1.2 0.2

Gross fixed investment 345.7 0.9 4.0 0.1 2.6

- Business investment 205.6 3.4 1.7 0.8 4.0

- Housing investment 70.7 -5.0 6.8 -1.7 3.3

- Government investment 69.3 0.3 7.8 -0.3 -2.0

Growth contribution from inventories -0.2 -0.2 0.4 -0.5 0.3

Exports 1023.8 0.8 2.6 0.4 3.0

- Goods exports 627.0 1.8 -0.2 3.4 2.9

- Service exports 396.9 -0.8 7.1 -4.2 3.1

Imports 915.5 1.5 3.8 -1.9 2.9

- Goods imports 574.9 3.6 2.1 -0.1 3.0

- Service imports 340.6 -2.0 6.7 -5.1 2.8

Growth contribution from net exports -0.3 -0.3 -0.4 1.2 0.2

GDP 1886.4 -0.5 1.1 1.6 1.9

Economic indicators 2013 2014 2015 2016

Current account, DKK bn 136.0 121.9 130.0 135.0

- % of GDP 7.2 6.3 6.6 6.6

General government balance, DKK bn -20.0 34.6 -38.2 -49.4

- % of GDP -1.1 1.8 -1.9 -2.4

General government debt, DKK bn 849.8 867.9 759.5 752.2

- % of GDP 45.0 45.2 38.4 36.8

Employment (annual average, thousands) 2748.8 2770.4 2796.2 2824.5

Gross unemployment (annual average, thousands) 153.3 134.1 124.2 116.8

- % of total work force (DST definition) 5.8 5.1 4.7 4.4

Oil price - USD/barrel (annual average) 109 99 55 62

House prices, % y/y 2.7 3.4 5.5 4.9

Private sector wage level, % y/y 1.2 1.3 1.6 2.2

Consumer prices, % y/y 0.8 0.6 0.6 1.6

Financial figures 23/09/2015 +3 mths +6 mths +12 mths

Lending rate, % p.a. 0.05 0.05 0.05 0.05

Certificates of deposit rate, % p.a. -0.75 -0.65 -0.55 -0.55

2-yr swap yield, % p.a. 0.33 0.20 0.20 0.25

10-yr swap yield, % p.a. 1.33 1.20 1.40 1.60

EUR/DKK 7.459 7.455 7.455 7.455

USD/DKK 6.71 6.78 6.78 6.48

% y/y

Forecast


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Sweden

Exports slowly taking over

The Swedish economy is still awaiting its redemption from a long

period of export industry malaise. Although we see an international

improvement gradually taking hold in the Swedish export sectors, we

are weary of financial markets and policy markers believing (anew)

that this process will be swift and strong.

Indicators for the immediate future are still positive, with new orders

at the highest levels for years and survey data remaining in positive

territory. By and large, domestic financial conditions should remain

supportive, and we expect the SEK to remain weak from a historical

perspective supporting the export industry for some time to come.

GDP growth should continue to be strong from an international

perspective, growing 2.5-3% y/y this year and 2-2.5% y/y in 2016.

This is above our long-held estimate of potential GDP growth of 1.5%

y/y and this growth serves to push employment higher. It also should,

with a considerable lag, imply a stabilisation of inflation at somewhat

higher levels than seen currently. However, over the forecast horizon

inflationary pressures are likely to remain lower than normal. It is

only far beyond 2016 that we see the inflation target being attained

and when the Riksbank could start normalising rates.

The Riksbank is, in our view, clearly banking on the past year’s SEK

weakness transforming into higher inflation expectations and

stronger wage growth. We are – to put it bluntly – sceptical.

Instead, we believe that the Riksbank will be forced to act again as

inflationary pressures will recede come winter. Specifically, we expect

the Riksbank to cut rates by another 10bp (to -0.45%) and to extend

its current QE programme further.

Developments on Swedish export markets

Global GDP growth remained subdued in H1 15. Furthermore, according to

IMF data, global growth has been particularly weak in Emerging Market

Economies (EMEs). In Advanced Economies, the bulk of Swedish export

markets, growth has fared considerably better. That said, the often referred to

measures on global trade, and growth from The Netherlands Bureau for

Economic Policy Analysis, also demonstrate a rather worrying trend. To

some extent, the adverse developments visible in the world economy are

probably attributable to the weak demand for input goods in general and to

raw materials in particular.

Global activity indicators continue to be optimistic and with recent stimuli

from, inter alia, the ECB, Danske Bank Market’s forecasts point to decent

growth for Swedish export markets. Furthermore, after a longer period of

sub-par investment growth in Swedish export markets, which has hampered

Sweden’s input and investment goods laden export industry, our forecasts

suggest that the composition of demand for Swedish export markets is finally

working in favour of the Swedish export industry. All-in-all, import demand

on Swedish export markets – Sweden’s world market growth – is expected to

be around 4.5% y/y in 2015 and accelerate to 5% y/y in 2016.


Source: Statistics Sweden, Danske Bank

GDP and investment growth on Swedish export

markets

Sources: National Institute for Economic and Social Research

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

Statistics Sweden (SCB). Danske Bank Markets calculations

Exports align with strong world market growth

Sources: National Institute for Economic and Social Research



% y/y 2015 2016 2015 2016

GDP, calendar adjusted 2.8 2.3 2.1 2.1



Gross fixed investment 5.2 4.6 5.3 3.6

Exports 4.3 4.9 3.8 5.3

Imports 2.8 4.7 4.9 5.2

Unemployment rate 7.8 7.4 7.8 7.6

Inflation 0.0 1.2 0.2 1.5


Current account, % of GDP 7.4 7.6 5.4 5.4


Sweden


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Financial conditions remain benign

Financial conditions have been unusually expansionary ever since the global

financial crisis. The Riksbank and other central banks have cut rates close to

(and below) zero, have forced down longer rates via quantitative easing

programmes and they have also kept asset prices elevated and exchange rates

attractive in the process.

Short-term interest rates have remained low due to the barrage of Riksbank

policy stimuli over the past few months. We have no indications of anything

but continued very low interest rates, especially since the Riksbank has

forcefully underlined that a rise in market rates would be highly unwelcome.

Meanwhile, longer rates have demonstrated both higher volatility and have

lately, if anything, risen somewhat in response to expected Fed tightening

and a more robust outlook for the US economy. In Sweden, however, the lift

in longer rates has been considerably less pronounced, probably due to the

Riksbank’s significant purchases of government bonds. Looking ahead, we

expect domestic rates – both short and long term – to continue to be on the

low side of economic developments. The threat of additional measures from

the Riksbank are, under almost any circumstances, working to keep a lid on

attempts to push interest rates higher. To summarise, we expect a rise in rates

over the forecast horizon, but the rise is likely to be a very slow and low rate

cycle indeed, and with apparent downside risks.

The SEK has strengthened in relation to the USD (mainly) since the last

monetary policy meeting in September and this has been duly noted by the

Riksbank. However, USD weakness is something of a double-edged sword as

Sweden is – roughly speaking – ‘importing in USD and exporting in EUR’.

With regard to the EUR, the SEK remains on the weak side, which makes the

recent move less problematic from a demand perspective than from an

inflation perspective. Looking forward, after a short period of volatility as the

global growth and monetary policy outlook is repriced by market

participants, we forecast a strengthening of SEK in relation to the major

currencies.

Due to a weak SEK and a long-awaited international demand spurt, we

expect domestic equity markets to perform well over the coming years. Over

the forecast years we estimate another 10-15% upside potential in stock

markets and a resumption in trend growth thereafter. On the housing market,

a highly contested issue in Sweden, we keep a cautious stance as our

fundamental indicators point to a still rich valuation of the domestic housing

stock. After a strong H1, we expect prices to be stable in H2 15 and even

drop somewhat in 2016 as new regulations are introduced and the income

outlook is revised down due to low wage growth and higher taxes etc.

Turning to fiscal policy, we start by highlighting that public finances have

gradually deteriorated over the past few years, much as we discussed back at

the height of the financial crisis. Of course, this has also lent support to the

economy and helped to improve the economic conditions for households and

companies alike. However, due to a long period of sub-par GDP growth,

which has also implied lower public tax income, the structural general

government deficit has increased and is currently close to 1.5% of GDP.

Regardless of whether or not parliament lowers the fiscal target to achieve a

balanced budget target or keeps the current 1% surplus target, further

retrenchments in public finances are necessary. For the current year, higher

income is helping to improve the structural deficit somewhat and in 2016 we

Longer interest rates (swaps) on the rise

Source: Macrobond. Danske Bank Markets calculations

Economic conditions broadly balanced

Sources: KI, SCB, Macrobond. Danske Bank Markets calculations

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)

Riksbank sure to devote a lot of attention to the

SEK

Source: Macrobond, NIER and Riksbank. Danske Bank Markets

calculations.

Despite a correction the Swedish stock market is

performing well

Source: Nasdaq OMX, Standard & Poor’s and Macrobond. Danske

Bank Markets calculations


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expect the government to hike taxes by a total of SEK30bn. Further active

consolidation measures of approximately that size will be necessary in the

years to come to put the fiscal house in order, but these measures will, of

course, also restrain consumption and the outlook for investment.

All in all, financial conditions have been stimulatory for a long period of time

and we expect them to remain supportive throughout most of our forecast

period.

H2 to be slower than H1

At 1.1% q/q (seasonally and working-day adjusted), Q2 15 GDP numbers

came in somewhat better than we expected which, together with a slight

upward revision to Q1, implies that GDP growth in H1 15 reached a strong

3% y/y. Even though both private consumption and exports deviated to the

upside of our forecast, the main culprit for the strong GDP growth in H1 was

very low growth in imports, pushing the net export contribution up towards

1pp y/y. Even though most indicators – orders, survey data etc – point to

continued strong growth in Q3 and H2 15, we expect imports to normalise,

implying a temporarily lower net export contribution and lower overall GDP

growth over the same timeframe.

This should not stop the expected GDP growth for 2015 from being

reassuringly high at 2.8% y/y and with some near-term upward risk the

current woes on financial markets should subside faster than currently

expected. In 2016, we forecast a small deceleration in GDP growth, but this

is mainly a result of private consumption and housing investments settling

into a more sustainable trajectory in the face of higher taxes and the forced

amortisation regulation that we see finally being enacted. Underlying

conditions are still comforting, with strong population and labour force

growth and decent productivity growth, even if not at the exuberant levels

seen pre-crisis.

Exports regaining some of their former strength

The global financial crisis (GFC) dealt a devastating blow to the important

Swedish goods export sector and thus to Swedish industrial production.

Whereas most other sectors and demand components have risen towards

trend, the goods export sector has continued to be weak and it has yet to

reach the levels seen before the GFC hit. That said, and as indicated above,

international demand should improve over the forecast horizon and the SEK

is still competitively valued from a historical perspective. Add to that the

foreseen shift in the composition of international demand into investments

goods, and the outlook for Swedish exports is indeed brightening.

Nevertheless, from a historical perspective, international demand growth is

still low and that proposition also holds true for international investments

growth, which is the relevant measure for most Swedish exporters. In

numbers, our estimates for future exports growth demonstrate a modest rise

from 3.8 % y/y in 2015 to 4.5% y/y in 2016.

The fiscal policy stance is still very expansionary

Source: National Institute for Economic and Social Research



Urbanisation driving house prices

Source: Nasdag OMX – KTH and Macrobond, Danske Bank

calculations

GDP hours worked and productivity

Source: National Institute for Economic Research (KI) and


Export industry finally seeing some light

Source: National Institute for Economic Research (KI),

Swedbank/SILF and Statistics Sweden (SCB). Danske Bank

Markets calculations


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Nordic Outlook

Investments growth declines but becomes better

balanced

Gross fixed capital formation – investments – grew by almost 8% y/y in

2014. Strong investments growth continued into H1 15 but with some loss of

momentum in housing, machinery and ‘other’ (R&D etc) investments. We

expect both machinery and ‘other’ investment growth to resume a more

positive trajectory over the forecast horizon, but as for housing investments,

anything but a sharp deceleration from the 20%-plus y/y growth rates seen

over the past quarters would be both surprising and worrying. The main

culprit for the more solid investment growth is of course an improved outlook

for all export sectors.

Public investments have been unusually strong since the GFC and while this

is partly a result of fiscal stabilisation policy efforts, we expect this to endure

even beyond our forecast horizon as the need to replenish depleted capital

(infrastructure, schools, hospitals etc) should continue for some time and the

rapid urbanisation of the Swedish population calls for expanded investment

in public capital in the metropolitan areas.

All in all, we expect investments to grow by 4.8% y/y this year and for this

rate to decelerate slightly to 4.2% y/y in 2016.

Consumption finally slipping into the back seat

In Sweden, the GFC provoked an unparalleled expansion of economic policy.

Not only did the Riksbank cut the repo rate from 4.75% to the current minus

0.35%, but fiscal policy was also relaxed, primarily via tax cuts to low

income households, to the tune of some SEK200bn. Back-of-the-envelope

calculations suggest that for the median household this amounted to a boost

to disposable income far in excess of SEK5000 per month. Hence, it should

come as no surprise that both consumption and savings have been strong

throughout recent years.

Looking ahead, we have already discussed the impending tax hikes and

forced amortisation regulations being enacted. After ‘too high’ centralised

wage rounds over the past years, hampering competitiveness in the export

industry, we also expect the upcoming wage agreements to lead to relatively

low wage growth in the forecast period. This bitter cocktail of income growth

reducing ingredients is nonetheless balanced by sweet tasting employment

and hours worked growth and continued – perhaps artificially sweet – asset

price inflation. Decent consumption growth is underpinned by surveys

revealing a high degree of optimism, especially regarding households’ own

financial prospects.

We expect the almost inexplicably high savings ratio over the past few years,

which we have attributed partly to demographic reasons and partly to

households wanting to compensate for an expected lower yield thus raising

real savings, to remain high for the foreseeable future.

In conclusion, we expect households to keep consumption growth at a rate

consistent with historical levels. This, nevertheless, constitutes a deceleration

in consumption growth, from 2.3% y/y in 2015 to 2.0% y/y in 2016.

Due mainly to demographic reasons, we expect public consumption to

continue its strong growth over the forecast horizon and beyond. Not only is

the burden of an ageing population gradually seeping into the fiscal outcomes

over the foreseeable future, but the current high level of immigration has also

caused public expenditures to rise, and there is not much to indicate that these

Investment growth by sector (and type)

Source: National Institute for Economic Research (KI) and

Statistics Sweden (SCB). Danske Bank Markets calculations.

Orders, industrial production and capacity

utilisation

Source: Macrobond, National Institute for Economic Research (KI)

and Statistics Sweden (SCB). Danske Bank Markets calculations

Consumer confidence

Source: Macrobond and KI. Danske Bank Markets calculations

Disposable incomes and savings ratio

Source: SCB and NIER. Danske Bank Markets calculations


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costs will diminish dover the forecast horizon. All in all, we expect public

consumption to rise by 1.8% y/y in 2015 and 1.5% y/y in 2016.

Inventories, imports and net exports

As previously touched upon, imports were weak in H1 2015, dropping 1%

over H2 2014. Considering a rather small run down of corporate inventories

and an overall strong demand growth this fall has been somewhat surprising.

That said, when looking at details, we can see that it is limited to some posts

that we deem to be of temporary nature. Hence, imports should bounce back

up again as global demand and exports return in force.

To sum up, we expect the contribution to GDP from inventories to be

negative by 0.3p.p. y/y in 2015 and by 0.2p.p. y/y in 2016. Net exports are

calculated to contribute to GDP by 0.7p.p. y/y this year and 0.3p.p. y/y in

2016.

A less somber productivity outlook

After growing strongly for a couple of years, growth in hours worked seems

to have receded going into 2015. As GDP growth and business sector

production has been respectable throughout, this has implied higher

productivity in H1 2015. When delving into details, it seems that growth in

the average hours worked has also normalized, i.e. receded after a strong

2014, which serves to square the data with the stronger employment

numbers.

Looking ahead, we expect the capital intensive exports industry to power

away as the international outlook stabilises and improves over our forecast

horizon. Domestic, labour intensive, sectors are also expected to tag along,

albeit at a slower pace than the neck-breaking speed that we have seen over

the past few years. All in all, hours worked is expected by us to grow 0.8%

y/y in 2015 and 1.1% y/y in 2016.

Neither trying to take away anything from the productivity numbers over the

past few years, nor opening up the seemingly ubiquitous discussion on the

reasons for a lower productivity growth, we can simply attest to productivity

growth in the wake of the GFC being more than 1p.p. lower than in the

goldilocks period of the 1990s and early 2000s.

From that perspective, our forecast productivity growth of 2% y/y in 2015

and 1.2% y/y in 2016 is sizeable.

Labour markets, resource utilisation and inflation

Employment has undoubtedly improved dramatically both in absolute terms

and relative to demand over the past few years. However, in relation to the

supply of labour – the labour force – growth has been less impressive

implying only a very gradual reduction in unemployment rates. Over the past

months, the unemployment rate has nevertheless decreased from almost 8%

to 7%, but this seems to have more to do with a surprisingly small influx of

labour, despite strong population growth and good employment growth. Or,

put another way, the participation rate has dropped like a stone. But we

believe this to be another statistical artefact in what must be among the most

volatile and obscure statistics published by Statistics Sweden and why a

strong leap back up is expected during the coming month(s). This would,

arithmetically, imply a move back up in the unemployment rate.

Consumption outlook stabile

Source: KI and SCB. Danske Bank Markets calculations

An end to the era of large inventory swings

Source: KI and SCB. Danske Bank Markets calculations.

Employment plans and vacancies are doing well

Source: Macrobond, SCB and KI. Danske Bank Markets

calculations.

Labour markets should slowly improve



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Nonetheless, below the volatile headline numbers, we expect the trend

improvement on labour markets to continue as an improvement in demand

unfolds. Survey data (PMI, BCI) indicates that employment plans are on the

rise and vacancies are strong and rising while notices of lay-offs are close to

cyclical lows. In short, most indicators support a further strengthening of

labour markets.

Stronger labour markets mean tighter labour markets, which is another way

of expressing that the labour market gap (hours worked gap) is diminishing.

That said, before rushing into any inflationary conclusion, the level of

unemployment is high from an historical perspective and the influx of labour

should continue to rise swiftly, almost keeping pace with the demand for

labour. In short, the labour market gap is currently rather large, explaining

the low wage inflation and low wage expectations, and why inflation (close

to target) will tarry close to current levels. The fact that the productivity gap

(and thus the output gap), by our calculations, seem more strained, only has a

weak positive impact on our inflation forecast. In addition, we are less certain

on these calculations as they would entail much stronger investment growth

and in other sectors than we have currently seen.

Inflation, also noted by the Riksbank, has been on a very gradual upwards

trend over the past year. However, this is almost exclusively a result of an, on

average, weak(ening) krona over the past two years. When filtering out the

direct – and indirect – effects of the weak SEK, already low inflation

becomes much lower. Of course, we also believe that inflation will climb

further from here, mainly due to statistical ‘base’ effects, which when last

year’s energy prices fall out of the inflation calculations, will start to recede

again (come Jan-Mar 2016).

This is where our main analytical divergence to the Riksbank arises. The

Riksbank assumes that the current rise in inflation will be sufficient to keep

the next centralized wage round in line with historical experiences. And in

addition, the Riksbank expects the continued tightening of the labour market

to push up wage drift (i.e., what we now refer to as the rest post since it

contains all the non-numerical wage agreements as well) in line with the

historical average. We are sceptical of this proposition, to say the least.

‘Wage drift’ has been declining for more than 15 years and is currently flat.

In our view, this is due to Swedish companies being price takers to a far

higher degree than the Riksbank has assumed and that the previous two wage

rounds were concluded at levels inconsistent with Swedish companies

preserving their competitiveness, in turn, pushing down the profit share over

the past few years. This implies, what both trade unions and employers seem

to have understood, that wage pressures will be very moderate over the

coming years. We believe that the Riksbank will soon come to this view too.

Resource utilisation remains low…

Source: KI and SCB. Danske BankMarkets calculations

Profits and hourly average earnings weak


Profit share remains repressed


Wage drift grinding to a halt due to weak

competitiveness



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Nordic Outlook

The three main inflation measures, CPI, CPIF and CPIF ex energy (the ‘F’

relating to the assumption of fixed interest rate costs in the inflation

calculations) are all expected to rise over the coming months, due to lagged

effects of the SEK and second-round effects of last year’s low energy prices.

CPI and CPIF are set to deteriorate come Jan/Feb, whereas CPIF ex energy

should start to head south again by Mar/Apr. (For details see enclosed chart).

Our case on the Riksbank remains intact

For months (years even) we have called for further Riksbank stimuli. To be

fair, we too have been forced to revise our inflation outlook gradually

downwards over much of the past few years. Since the previous monetary

policy expansion in July, we have had a case of the Riksbank becoming

trapped between a fundamentally warranted strengthening of the SEK, which

will put a damper on the economy and, hence, inflation. From a Riksbank

perspective, the situation was all the more troublesome as the extensive

centralised wage negotiation round, comprising some four million workers,

has been just around the corner (mainly Mar/Apr 2016).

As major central banks have softened, the pressures on the Riksbank to act

have increased. We think that by no later than the December meeting

(published 15 December) the Riksbank will need to act, cutting rates by

another 10bp (to -0.45%) and expanding the QE-programme far into 2016 as

well as widening eligible securities to municipalities, possibly ABS and

perhaps even foreign government bonds (i.e., FX interventions). We live in

interesting times indeed!

Inflation is entrenched below target

Source: SCB, Riksbank and Macrobond. Danske Bank Markets

calculations

No hike in our forecast period

Source: Riksbank, Macrobond., Danske Bank Markets calculations


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Sweden: Forecast at a glance

Note: The national account figures relates to actual growth rates (i.e. not calendar adjusted or wda)

Source: Statistics Sweden, Danske Bank


SEK bn (current prices)


Government consumption 955.7 1.3 1.6 1.9 2.3

Gross fixed investment 674.2 0.6 7.6 5.2 4.6

Growth contribution from inventories -4.4 0.2 0.1 -0.3 -0.1

Domestic demand 3348.1 1.4 3.3 2.8 2.6

Exports 1722.4 -0.8 3.5 4.3 4.9

Aggregate demand 3343.7 1.6 3.4 2.4 2.4

Imports 1516.4 -0.1 6.3 2.8 4.7

Growth contribution from net exports 206.1 -0.3 -1.0 0.7 0.3

GDP 3549.7 1.2 2.3 3.1 2.6

GDP, calendar adjusted 1.2 2.5 2.8 2.3


Trade balance, SEK bn 122.3 114.7 129.0 137.7

- % of GDP 3.2 2.9 3.1 3.2

Current Account, SEK bn 260.4 242.3 304.0 326.7

- % of GDP 6.9 6.2 7.4 7.6

Public sector savings, SEK bn -52.8 -74.4 -72.0 -64.3

- % of GDP -1.4 -1.9 -1.7 -1.5

Public debt ratio, % of GDP* 38.7 43.8 43.9 43.3

Unemployment, % of labour force 8.0 7.9 7.8 7.4

Hourly wages, % y/y 1.5 1.8 2.5 2.6

Consumer prices, % y/y 0.0 -0.2 0.0 1.2

House prices, % y/y 3.6 6.9 10.3 -5.0

* Maastricht definition

Financial figures +3 mths +6 mths +12 mths

Repo rate, % p.a. -0.35 -0.45 -0.45 -0.45

2-yr swap yield, % p.a. -0.17 -0.25 -0.30 -0.15

10-yr swap yield, % p.a. 1.33 1.20 1.35 1.45

EUR/SEK 9.4 9.4 9.3 9.0

USD/SEK 8.4 8.5 8.5 7.8

23/09/2015

% y/y

Forecast


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Norway

Slower growth, no recession

The short-term outlook has worsened, driven by oil-related sectors.

As expected, second-round effects are now visible.

However, there are still no signs of third-round effects, as private

consumption and construction are holding up well, supported by

lower rates and public investments.

As the oil price is expected to move towards USD65 per barrel during

2016, the negative impact from lower oil investments should fade.

As a result, unemployment is likely to peak during H1 16.

Norges Bank cut the key policy rate to 0.75 % at the September

meeting. We think Norges Bank will stay on hold although another

cut cannot be completely ruled out.

Along with higher oil prices and improved global risk sentiment, we

expect this to support the NOK in 2016.

Weaker outlook in the short term

As expected, growth in the Norwegian economy slowed further in Q2 15, and

the short-term outlook is even weaker. The decline in oil investment is now

hitting oil-related industries hard, and we are beginning to see signs of

second-round effects in parts of the service sector. On the other hand, lower

interest rates are helping keep both private consumption and the housing

market moving, the weaker krone is boosting the export industry, and public

infrastructure investment is rising rapidly thanks to continued expansionary

fiscal policy.

GDP growth slowed to 0.2% q/q in Q2, led by a drop in industrial activity

and, in particular, business investment in the mainland economy. This is

probably due to the decline in oil investment since late 2013. Oil-related

industries expanded rapidly from 2011 to 2014, buoyed by high levels of

activity in the oil sector and high hopes for new discoveries. Once the oil

companies stood on the brakes in response to weaker profitability and lower

oil prices, a downturn in activity was inevitable. Redundancies and cost-

cutting in oil-related industries are now feeding through to the rest of the

economy via rising unemployment and decreased demand for goods and

services in other sectors.

The first signs of these second-round effects came in the spring in the form of

falling investment in the service sector, a weaker growth outlook and rising

unemployment in these other sectors. Investment in the service sector fell by

more than 6% in H1, and unemployment in business services is on the up.

As yet, however, there are no worrying signs of third-round effects. Private

consumption grew by 0.5% q/q in Q2, and housing investment by 1.1% q/q

after strong growth in Q1 too. The latter is, of course, down to the tight

housing market, with prices for existing homes continuing to climb and the


Source: Statistics Norway, Danske Bank

Slower growth, no recession

Source: Macrobond Financial, Statistics Norway, Danske Bank

Moving towards zero-growth

Source: Norges Bank

% y/y 2015 2016 2015 2016

GDP (mainland) 1.3 1.8 1.5 2.3



Gross fixed investment -3.5 0.7 -1.8 1.9

Exports 1.8 1.8 1.6 1.5

Imports 3.4 2.6 3.4 3.0

Unemployment (LFS) 4.3 4.2 4.0 3.8

Inflation 2.1 2.5 2.1 2.0


Norway


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Nordic Outlook

stock of properties for sale falling, and incoming data suggest that this trend

has continued into Q3. Growth in retail sales has been moderate, but without

any signs of a serious slowdown, and sales of new cars are holding at high

levels. Both housing prices and housing starts are continuing to rise.

So despite the bleaker outlook for the Norwegian economy, with falling oil

prices and higher unemployment, households are keeping the engine running.

This probably has to do with the two rate cuts in the past year propping up

purchasing power despite lower wage growth and higher unemployment. It

may also be because the downturn has, so far at least, been concentrated both

sectorally and geographically.

At the same time, the downturn is being softened by the oil-fund mechanism

and the fiscal rule decoupling spending from oil revenue. The fiscal policy

stimulus this year is an estimated 0.5% of mainland GDP. Besides tax cuts to

stimulate demand in the private sector, there has been huge investment in

transport infrastructure, as can be seen clearly from growth in public

investment of 3.5-4% in H1. This is also helping keep activity up in the

construction sector.

On top of this, a weaker krone together with slightly stronger global growth

is boosting growth in the traditional export industry. Although exports of

goods from the mainland economy fell 0.2% in Q2, this followed on from

growth of 3.2% q/q in Q1. The foreign trade statistics suggest a moderate rise

in exports in Q3, but being nominal data they may conceal the effect of a

weaker krone.

Oil price key

Heading into summer, we reckoned that the worst was still ahead of us,

because the oil supply sector had some way to go in adjusting to the change

in activity levels. At the same time, we predicted that we would see signs of

stabilisation towards the end of the year as higher oil prices improved the

profitability of projects in the Norwegian sector. We therefore expected oil

investment to begin to climb again in H1 next year, which was confirmed by

an encouraging oil investment survey pointing to stabilisation in 2016.

Since the June edition of Nordic Outlook, however, the price of oil has

dropped by almost USD 20/bl, pushing up uncertainty and the downside risk

as regards both oil investment and the Norwegian economy We have

therefore tentatively revised down our forecast for oil investment next year

from -2.5% to -9% y/y. This means that the decline in oil investment will last

two to three quarters longer than we previously assumed, probably resulting

in more rounds of downsizing and cost-cutting in oil-related industries. This,

in turn, will prolong the downturn in the Norwegian economy, bringing

slightly weaker growth and higher unemployment than we assumed in June.

The impact on the rest of the economy will, however, be dampened by lower

interest rates and an even weaker krone, which will stimulate the household

and export sectors. These trends were largely confirmed by the results of

Norges Bank’s regional network survey in August, which indicated further

deterioration in oil-related industries over the next six months – largely as we

had anticipated – and a continued decline in business services. On the other

hand, retailers reported a much brighter outlook, and the construction sector

and traditional exporters forecast roughly the same levels of growth as in H1.

Uneven growth

Source: Norges Bank

Consumers holding up

Source: Statistics Norway

Public investments supporting construction

Source Statistic Norway

Lower oil prices increase downside risk

Source Macrobond Financial


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Leading indicators, however, reveal a slightly more complex picture.

Although we are seeing a clear fall in overall manufacturing orders, which

suggests that the downturn in oil-related industries is continuing to dominate,

we are also seeing a marked increase in construction orders. This is due

partly to rising orders for new housing, but the most important contribution is

from strong growth in civil engineering orders, which goes to show just how

important publicly funded infrastructure projects are at the moment.

On the other hand, consumer confidence has dropped to its lowest levels

since the financial crisis, which could mean that we are looking at a more

serious downturn in private consumption than the hard data suggest. That

said, the drop in consumer confidence is due mainly to diminished

confidence in the economy as a whole, whereas expectations of personal

finances are still relatively favourable.

Looking further ahead, we still expect a gradual tightening of the oil market

to push oil prices back up towards USD 70/bl at the beginning of 2017, and

higher still a little further ahead. Besides the Johan Sverdrup field, which will

generate annual investment of around NOK50bn through to 2019, a number

of other relatively large projects will become profitable if oil prices improve

the way we anticipate. We therefore expect the fall in oil investment to be

short-lived rather than mark the start of a long-term decline in the Norwegian

oil sector. Internal cost-cutting and lower costs for rig hire have also pulled

down breakeven levels for all projects. This means that the need for

economic reorganisation will be limited, which will decrease the downside

risk for now.

If, on the other hand, oil prices hold at current levels or lower for a number of

years, the need for change will be more dramatic. The negative consequences

would probably be offset to some extent by even lower interest rates and an

even weaker krone, and there is still plenty of fiscal leeway, but if the

downturn in oil-related industries continues into 2017, there would be reason

to expect unemployment to climb much higher than in our main scenario.

High inflation only temporary

Core inflation has surprised to the upside in recent months, with the annual

rate climbing to 2.9% in August on the back of faster growth in prices for

imported goods. It appears that the pass-through from the depreciation of the

krone to import prices has been both stronger and faster than in previous

years. The stronger pass-through may be because the global deflationary

pressures of the past 15 years are now fading or even reversing.

The faster pass-through from exchange rates to prices in the stores could be

down to many factors. For one, the krone has now been in decline for so long

(two years) that both importers and retailers no longer expect it to be only

temporary and rapidly reverse as seen in the past. We have also seen margins

in the retail trade come under pressure in recent years.

Either way, a faster pass-through from exchange rates to retail prices means

only that imported inflation will arrive earlier than expected, and that more of

the krone’s depreciation has already been built into prices, with the result that

import prices will also fall back again more quickly than before.

Consumer confidence is plummeting

Source: Finance Norway

Oil activity ’back to normal’?


Imported inflation

Source Statistics Norway


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Furthermore, there are no signs of the weaker krone leading to broader

inflationary pressures. Domestic inflation has actually slowed somewhat

during the year, and we expect the underlying price drivers – lower wage

growth and higher productivity growth – to dampen domestic inflation

further. We therefore expect core inflation to peak around current levels

during the autumn before gradually receding as the exchange rate effects fade

and eventually reverse.

Interest rates at bottom

As the recent drop in oil prices has increased the downside risk to the

Norwegian economy, Norges Bank cut interest rates at its meeting on 24

September by 25bp to 0.75 %. The new interest rate path presented in the

monetary policy report indicates that rates will stay on hold throughout 2015,

with an increasing probability of another rate cut, accumulated to 64 % in Q3

2016. However, both domestic and global risks are currently high. Hence, we

would not completely rule out a rate cut before year-end but the signal from

the MPR is that we need to see a major weakening of the outlook for a rate

cut to materialise.

As mentioned above, we expect oil prices to approach USD60/bbl at the end

of the year given signs of a slightly tighter oil market heading into 2016. We

believe that this will reduce the downside risk to the Norwegian economy,

with the result that Norges Bank’s key rate bottoms out at 0.75%. Towards

the end of next year, we expect growth in the Norwegian economy gradually

to pick up again as the headwinds from lower oil investment ease and

become tailwinds. We would therefore expect Norges Bank to need to raise

interest rates again at the very end of next year or early in 2017.

Since oil prices collapsed last autumn, the correlation between oil prices and

the krone exchange rate has become much closer. This is, of course, a result

of lower oil prices undermining Norway's terms of trade (export prices

relative to import prices), which implies a depreciation of the (real) exchange

rate. At the same time, the decline in oil prices has impacted on short-term

interest rate expectations through the negative effect on oil investment and, as

a result, the economy.

The turmoil in global financial markets since the summer has further

weakened the krone through a decrease in general risk appetite, which often

hits the less liquid currencies.

Given our expectation of stronger global growth, and so an increased appetite

for risk, higher oil prices and a slightly more aggressive central bank, we

expect to see a much stronger krone in 2016. This is supported by our long-

term model, which suggests that the krone is currently more than weak

enough to compensate for the stronger growth in costs in Norway since 2003.

Imported prices will soon peak


Markets price in an additional rate cut

Source: Norges Bank, Danske Bank Markets

NOK: strong correlation with the oil price

Source Macrobond Financial


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Norway: Forecast at a glance

Source: Statistics Norway, Danske Bank


NOK bn (current prices)


Public consumption 653.5 5.6 2.7 2.3 2.3

Gross fixed investment 717.4 8.7 0.6 -3.5 0.7

Petroleum activities 212.3 19.6 -1.7 -13.0 -9.0

Mainland Norway 505.1 5.6 1.7 -0.5 3.0

Dwellings 150.2 7.1 -1.6 1.2 3.0

Enterprises 224.5 7.1 0.2 -3.0 1.2

General government 130.3 13.3 8.2 2.7 2.5

Mainland demand 2388.3 5.0 2.1 1.2 2.3

Growth contribution from stockbuilding 0.2 0.6 -0.2

Exports 1198.8 -0.5 2.7 1.8 1.8

Crude oil and natural gas 576.4 -5.6 1.5 -0.5 0.0

Traditional goods 321.8 4.0 2.3 5.0 4.0

Imports 875.5 6.6 1.9 3.4 2.6

Traditional goods 510.7 3.8 -0.3 2.8 2.5

GDP 3071.1 3.6 2.2 1.5 1.5

GDP Mainland Norway 2418.8 5.4 2.2 1.3 1.8


Employment, % y/y 1.1 1.1 0.3 0.6

Labour force, % y/y 1.2 1.1 1.0 0.5

Unemployment (LFS), % 3.5 3.5 4.3 4.2

Annual wages, % y/y 3.6 3.1 2.7 2.8

Consumer prices, % y/y 2.1 2.0 2.1 2.5

Core inflation 1.6 2.4 2.6 2.4


Repo rate, % p.a. 0.75 0.75 0.75 0.75

2-yr swap yield, % p.a. 0.96 1.05 1.10 1.20

10-yr swap yield, % p.a. 1.98 1.95 2.20 2.40

EUR/NOK 9.46 9.40 9.25 8.80

USD/NOK 8.49 8.55 8.41 7.65

25/09/2015

% y/y

Forecast


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Finland

Reforms ahead

We have revised down our forecast and expect Finnish GDP to be flat

in 2015. Fuelled by exports and modest investment recovery, we

forecast GDP will rise by 0.8% in 2016. We believe the impact of

Russia will wane and we continue to expect modest growth in exports

to western markets on the back of pent-up investment activity.

The outlook for domestic demand continues to be dull. Household

purchasing power remains weak, due to unemployment and a

moderate wage agreement. A fall in consumer prices boosted private

consumption in early 2015 but the impact is unlikely to last into 2016.

Investment activity shows the first signs of bottoming. The housing

market outlook is dull and prices and trade volumes stabilised in the

spring. A cautious supply of new housing and low interest rates have

helped to keep housing prices relatively stable.

Prime Minister Juha Sipilä’s government is reform oriented and

aims to adjust public finances by EUR10bn (5% of GDP) in four

years. The government has also announced wide-reaching labour

market reforms, which should produce an internal devaluation by

lowering unit labour costs by 5%. These measures have met strong

opposition from labour unions.

Finland has already lost its status as a triple-AAA country and

further downgrades are possible. In our main scenario, the debt-to-

GDP ratio will reach nearly 70% before peaking. The new budget

and reform plans may boost confidence in Finnish creditworthiness

but reforms take time to implement. In any case, the RFGB market is

one of the biggest beneficiaries of the ECB QE programme.

Recovery has been disappointingly slow

According to revised figures, Finland’s gross domestic product was 0.4%

smaller in 2014 than in 2013. Thus, the Finnish economy has contracted three

years in a row. According to preliminary data, GDP rose in April to June by

0.2% from the previous quarter. Compared with the second quarter of 2014,

GDP adjusted for working days was 0.2% higher. The reported figure was the

slowest among EU countries. The economy is crawling well below potential

output and the recovery in the euro area has not reached Finland yet. The

situation has not improved much in recent months. Industrial production and

manufacturing new orders were down in July. On the positive side,

manufacturing new orders have been edging higher in H1 and retail trade

volumes rose in July. Some forest companies have announced large capex plans

and construction activity has stabilised. We believe GDP in 2015 is likely to be

flat but we expect net exports and investment to lead GDP to a positive trend in

2016. Lower energy prices and a weaker euro support the Finnish economy but

weak exports to Russia and government expenditure cuts produce headwinds.


Source: Statistics Finland, Danske Bank Markets

Lost decade in Finland’s GDP

Source: Statistics Finland

Industrial production is not growing


% y/y 2015 2016 2015 2016

GDP 0.0 0.8 0.5 1.4


Public consumption -0.2 -0.5 0.0 -0.5

Gross fixed investment -2.0 2.5 -2.0 3.0

Exports 1.0 3.0 2.0 4.0

Imports -0.3 2.5 1.0 2.5

Unemployment rate 9.6 10.0 9.2 9.0

Inflation -0.1 1.0 0.2 1.0


Current account, % of GDP 0.4 0.5 -1.0 -0.7

Finland



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Private consumption fell by 0.2 % q/q in April to June but was still 0.8% higher

y/y due to a strong first quarter. The fall in consumer prices in January to July

improved household purchasing power but we believe this impact is likely to

disappear later in 2015. Interest-only months, which a few large banks including

Danske Bank offered actively for housing loan customers, have boosted

purchasing power. These will bring an estimated total EUR0.5bn to consumers’

pockets over a 12-month period. Investments were flat q/q and the decline from

the previous year slowed down to 2.6% y/y. Public consumption expenditure

was roughly flat. Exports were 1.2% down y/y, although exports recorded a

0.5% rise from the previous quarter. Russia has been the weak spot in exports,

while exports to Germany and the US have grown.

Confidence indicators have improved lately, except for manufacturing.

Consumer confidence has risen close to the long-term average but consumers

are still pessimistic about employment and disinterested in house purchases.

The retail trade and construction confidence have improved but are below

normal. Manufacturing confidence notched down in July but export

expectations have been above normal.

Given that GDP was roughly flat in H1, manufacturing weakness continued

in July and consumer confidence has been relatively stable, we expect no

GDP growth in 2015. Assuming that the US leads a global recovery and the

euro area is gaining further strength, we expect output to resume slow growth

in 2016. We expect public consumption to shrink in 2016 and unemployment

to rise. We forecast GDP will grow only 0.8% in 2016.

Chances for consumption growth are in short supply

Private consumption fell by 0.2 % q/q in the second quarter but grew by 0.8%

y/y. Households’ ability and willingness to consume are restricted by many

factors. Unemployment is high and we forecast it will reach 10% next year.

One worrying factor is that long-term unemployment is rising quickly. Real

wage growth has also been weak. Taking into account these factors,

consumers have been surprisingly positive and consumer confidence is only

slightly below its long-term average level.

On the positive side, low interest rates and low –even negative- inflation have

been supporting consumers. In February this year, Finnish banks started to

grant housing loan holders a year free of amortisation, which has also had –

and should continue to have – a small positive effect on consumption.

The Russian slowdown has had several implications for Finland. Russians are

by far the largest group of foreign citizens visiting Finland. In particular, the

retail trade, hotels and local service businesses in south-east Finland rely on

Russian consumers. Most recent statistics show that overnight stays by

Russian tourists have collapsed by almost 40% from the peak level at the end

of 2013. However, the economic situation in Russia is weak but stabilising,

so most of the negative effect is probably behind us.

Outlook for private consumption in 2015 and 2016 is weak but stable.

Growth in retail trade has been more or less flat lately. Registration of new

cars has perked up but this could be because of the ‘1,500 euro wrecking fee’

introduced this July. Household purchasing power is likely to remain flat at

best due to unemployment and moderate wage agreements. In our view, the

planned budget cuts will also hit purchasing power. However, low interest

rates and low inflation will help to sustain activity. Some positive effect is

Confidence indicators

Source: Confederation of Finnish Industries EK, European

Commission

Consumer confidence below long-term average

Source: Statistics Finland, European Commission

Inflation and wage growth continue to decline



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also emanating from the free-of-amortisation campaign. We expect private

consumption to increase modestly by 0.4% in 2015 and 2016.

Exports weak despite the growing global economy

Among euro area economies, Finland is a rare example of a country that has

not seen much real growth in exports in over the past three years. In the

second quarter of 2015, exports of goods decreased by 2.0% y/y and exports

of services increased by 1.5% y/y. Overall, total exports were down 1.2%

y/y, although a small 0.5% increase was recorded q/q. Exports to Germany

and the US have held up quite well but exports to Sweden, the UK and, in

particular, Russia have decreased. The relative share of Russia has decreased

dramatically since the Ukrainian crisis and the US has taken the position as

the third-largest export market.

Exports of goods have suffered long-term damage from the descent of Nokia

and forest industries. Nokia phones are now gone and this impact is

disappearing. Exports have also suffered from a high share of investment

goods, which have been in short demand globally. If investment activity

expands in the euro area, Finland could benefit as early as 2016. Falling

demand for newsprint is a chronic issue but the forest industry strives to

restructure and invent. If Finland had an independent currency, the exchange

rate would probably have been devalued already. The euro is now weaker

than a year ago but Finland has still seen its price competitiveness weaken

compared with Germany and Sweden over the past 10 years. Unit labour

costs rose because of large wage increases between 2008 and 2012. Finland’s

relative position is slowly improving due to wage moderation in Finland:

higher wage rises in Germany and ‘creative destruction’ making output more

efficient. Despite the improving price competitiveness, Finnish exports

remain stagnant and unemployment keeps rising. The government believes

the process is too slow and is seeking ways to achieve a faster ‘internal

devaluation’ by reducing unit labour costs.

The government failed to push through a ‘social contract’ in which annual

working hours would have been extended. A new plan has been announced

including wide-reaching labour market reforms, which would produce an

internal devaluation by lowering unit labour costs by 5%. The measures

include capping paid holidays, lower overtime pay, no pay on the first sick

leave day and lower employer social security contributions. These measures

have met strong opposition from labour unions and strikes are likely. If the

plan is successfully implemented, the impact will be felt into 2017 and

beyond. Meanwhile, the outlook depends largely on demand from main

markets.

The shorter term outlook for the main Finnish export markets has remained

relatively good (Germany, Sweden, the US), with Russia being an exception.

The weakening of the euro should help exports to the US. Russia is slipping

into a deep recession. We expect Russian GDP and imports to fall

significantly in 2015, which keeps the export outlook poor. However, if the

Russian economy starts to recover in 2016, the negative contribution to

growth might wane. Russian trade has been volatile in the past too.

Despite higher export expectations in survey results, low order book levels

and unexpectedly weak manufacturing new orders in July suggest that

exports will continue to perform modestly at best in late 2015. Assuming a

continued recovery in the euro area, boosting pent-up investment activity, we

Redistribution of export destinations

Source: Finnish Customs

Finnish exports have failed to catch up

Source: Statistics Finland, CPB Netherlands Bureau for Economic

Policy Analysis

Export expectations very high

Source: Statistics Finland, European Commission


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expect exports to rise by 3% in 2016. If Finland regains competitiveness

through lower labour costs, exports could grow faster in the medium term.

Finland had a current account surplus from 1994 to 2010 but the trade

balance fell into deficit in 2011. The latest figures show a rapid improvement

and the 12-month rolling current account returned to a surplus in July.

Moreover, the current account balance for 2014 has been revised to a much

smaller deficit. The improvement has been driven largely by a fall in the

value of energy imports. Cuts to development aid planned by the government

should reduce the deficit in the secondary income account a bit in 2016,

helping to keep the current account balance in surplus. We forecast a small

current account surplus in both 2015 and 2016.

Early signs of recovery in investments

After falling 5.1% in 2014, investments have started to stabilise in 2015.

Investments were flat q/q in Q2 but still 2.6% lower y/y. Private investments

declined by 2.0% and government investments by 5.4% y/y. Housing

construction investments fell by 3.1%, while the volatile machinery,

equipment and transport equipment investments rose by 0.2% y/y. Following

the new national account system (ESA 2010), a new subsection was added to

investments: cultivated biological resources and intellectual property

products, which include R&D activities. These expenditures are significant –

around the size of machinery, equipment and transport equipment

investments combined. R&D activities tend to be more stable over business

cycles but these expenditures have suffered from Nokia-related cuts in recent

years. R&D recorded a 9% fall in Q2 15.

The future might be less bleak. Construction confidence has improved in Q3

and construction has risen q/q for two quarters in a row. Forest companies

have announced large capex plans in pulp and packaging material

investments. An annual survey by the Confederation of Finnish Industries

(EK) shows companies have increased their investment plans significantly.

Several things contribute to a better investment outlook: uncertainty about the

export market growth outlook has diminished, finance and other resources

are available and the government is pursuing a business-friendly policy.

We forecast investments will fall 2% in 2015, which would mark a fourth

consecutive year of shrinking fixed investments. The previous time

investments contracted for three successive years was in the early 1990’s

recession. In 2016, we expect increasing external demand and a recovery in

the construction sector to turn investments into 2.5% growth.

Housing market outlook is stable

Prices for old dwellings in Finland declined slowly in 2014 and overall the

situation in housing markets has been weak for three years. High

unemployment, a slowing economy and weak purchasing power are the main

factors behind the weakness. On the other hand, record-low interest rates and

declining margins have prevented prices from an even bigger decline. Also,

the chronic lack of supply in growth centres, especially in the Helsinki

Metropolitan Area, are supporting the price level.

However, there are signs that the situation is picking up a little. In the second

quarter, prices for old dwellings rose by 0.8% q/q. Also, the preliminary

figures from July show that prices continued to raise by 0.3% m/m. On

average, we expect housing prices to decline by 0.5% in 2015 before starting

Investment has fallen to a low level


Housing prices in the Nordic countries



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to increase modestly next year. However, there will be no permanent

improvement in the housing market as long as unemployment is rising.

Overall, the situation in housing markets is not rosy but stable.

Although it has been slowly increasing, the debt-to-income ratio of Finnish

households 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. The incentives to buy a house are falling as the share of deductibility

of housing loan interests in taxation will fall gradually over the next four years.

Fiscal austerity and reforms ahead

The conservative three-party government led by Prime Minister Juha Sipilä is

reform oriented and fiscal policy will be tightened significantly. The

government aims to adjust public finances by total EUR10bn with a

combination of short-term and long-term measures: expenditure cuts

(EUR4bn), structural reforms (EUR4bn) and growth-enhancing investments

(EUR2bn). An investment package worth EUR1.6bn should soften the negative

blow from frontloaded expenditure cuts but we expect growth to slow in 2016.

Reforms in the production of public services and the labour market are essential

for sustainability of public finances and for raising the long-term growth

potential. Bank of Finland economists have recently estimated that without

reforms potential growth could get stuck close to 1% p.a.

The government also aims to achieve a leap in competitiveness. It has

announced wide-reaching labour market reforms, which would produce an

internal devaluation by lowering unit labour costs by 5%. The measures

include capping paid holidays, lower overtime pay, no pay on the first sick

leave day and lower employer social security contributions. These measures

have met strong opposition from labour unions. Several unions went on strike

on 18 September and further strikes are likely. At worst, labour disputes

derail a nascent recovery. At best, Finnish economy regains competitiveness

and potential growth rises.

Together with other business-friendly reforms in the labour market, local

administration, production of social care and healthcare and regulatory

processes, the government could lift long-term growth. The success is

contingent on implementation, which will not be easy. Failure to reform

would reduce faith in the Finnish institutional system. Moody’s and Fitch

have placed Finland on a negative outlook and S&P has already downgraded

the sovereign rating to AA+. In our main scenario, the debt-to-GDP ratio

could reach nearly 70% before peaking. Together with slow growth, the

continual rise in debt-to-GDP ratio puts further pressure on ratings. The new

budget and reform plans may have bought Finland time but, in our view, it is

possible that Finland will lose all three AAA ratings.

Despite a potential rating downgrade, we do not see a significant increase in

government borrowing costs. Finland still has a good reputation and the RFGB

market is one of the biggest beneficiaries of the ECB QE programme. The

ECB’s decision to remove the 25% issue limit in non-CAC bonds is important

for the Finnish market, where QE purchases are large relative to market size.

Despite the expenditure cuts and modest recovery in the economy, the fiscal

deficit is going away slowly and we expect debt to continue accumulating

into the next decade. We forecast the debt ratio will reach 64.5% by the end

of 2016. Even though Finland was reprimanded for exceeding the deficit

Debt level inching up in the absence of growth


Government bond yields

Source: Macrobond Financial


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target in 2014 and the debt will exceed the 60% limit in 2015, it is unlikely to

get into problems with the EU Commission. Growth in debt has its

background in bad circumstances, fiscal policy will be tightened, reforms are

being planned and many other countries have got away with large debts.

Long-term unemployment increasing worryingly

The situation in the labour market has become murkier over the summer. The

seasonally adjusted unemployment rate has risen to 9.6% over this time.

During the Finnish depression in the early 1990s, the unemployment rate rose

to almost 20%, so those figures are still far away. Compared with the

eurozone, unemployment in Finland is lower than the eurozone average even

though economic development in Finland has been poor. However, while

unemployment is declining in the eurozone, it is growing in Finland.

The official figure understates the poor labour market conditions, as many

jobseekers have become discouraged and stopped looking for a job. This can

be seen in the increasing share of inactive population over the past few years.

Declining employment numbers, the scarcity of new vacancies and limited

wage pressure indicate that the weakness is due to inadequate demand.

What is worrying is that the number of long-term unemployed has increased

indicating that more and more unemployed have been without a job for at

least 12 months. The number of long-term unemployed is the highest since

1998. For them it is harder to find a new job and we believe many of them

will stay out of the workforce forever.

We forecast the average unemployment rate will be 9.6% in 2015 and

increase to 10.0% in 2016.

Long-term unemployment is rising fast

Source: Finnish Ministry of Employment & The Economy


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Finland: Forecast at a glance

Source: Statistics Finland, Danske Bank

National account 2013 2014 2015 2016

EUR bn (current prices)

GDP 202.7 -1.1 -0.4 0.0 0.8

Imports 79.4 0.0 0.0 -0.3 2.5

Exports 77.6 1.1 -0.7 1.0 3.0

Consumption 161.6 0.0 0.3 0.2 0.1

- Private 111.2 -0.3 0.5 0.4 0.4

- Public 50.2 0.8 -0.2 -0.2 -0.5

Investments 42.7 -5.2 -3.3 -2.0 2.5


Unemployment rate, % 8.2 8.7 9.6 10.0

Earnings, % y/y 2.1 1.4 1.1 1.1

Inflation, % y/y 1.5 1.0 -0.1 1.0

Housing prices, % y/y 1.6 -0.6 -0.5 0.5

Current account, EUR bn -3.6 -3.8 -1.7 -1.3

- % of GDP -1.7 -0.9 0.4 0.5

Public deficit, % of GDP -2.5 -3.1 -3.3 -2.9

Public debt/GDP, % of GDP 55.6 59.0 62.5 64.5


Repo rate, % p.a. 0.05 0.05 0.05 0.05

2-yr swap yield, % p.a. 0.05 0.05 0.05 0.10

10-yr swap yield, % p.a. 0.98 0.95 1.15 1.35

EUR/USD 1.11 1.11 1.11 1.15

% y/y

23/09/2015

Forecast


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Global overview

Emerging Markets the weak link

Emerging Markets have become the weak link in the global economy

and are currently the biggest risk factor.

We look for Chinese growth to hover around 6.5-7% in the coming

years, while there is going to be little relief for commodity-exporting

EM economies like Brazil and Russia – both in recession.

The US economy continues with a moderate recovery and the Fed is

expected to start raising rates in December – albeit very slowly.

The euro recovery faces some downside risk in the short term from

the EM turmoil but we expect the recovery to continue in the medium

term with growth rising to 1.7% in 2016 from 1.4% this year.

Emerging market economies and financial markets have been hit by strong

headwinds this year leading to a significant slowdown and financial turmoil.

Weak Chinese growth, a sharp decline in commodity prices and looming Fed

hikes have put significant stress on commodity-exporting economies like

Russia and Brazil, which are likely to see a shrinking economy by around -

6% and -2%, respectively, this year.

We look for Chinese growth to hit a low point in Q3 around 6% following a

very slight recovery to 6.5% during Q4 driven by stimulus and a housing

recovery that is well under way. However, activity is increasingly pulled by

higher growth in the service sector and we are in a transition phase where

Chinese industry is moving from growth rates of 10-15% from 2000-2012 to

now around 6-7%. The rebalancing is necessary for China but it means that

the countries that benefitted from exports exposed to China’s high commodity

consumption and industrial activity will continue to face challenges.

Turning to advanced economies, the US recovery has gained some steam over

the summer after a hit in Q1 from cold weather and port strikes. The labour

market is robust and the unemployment rate has fallen to 5.1% - the rate the

Fed regards as the long-term natural unemployment rate. We expect the US

economy to continue to grow around 2.5% in the coming years and the Fed to

start raising rates in December followed by a slow hiking path.

The euro area has seen decent growth this year but with a slight moderation

heading into the summer. In the short term we see downside risk as exports

and investments are vulnerable to the sharp slowing of the EM economies.

However, the medium-term growth drivers with decent real income growth,

recovering housing markets and improving credit growth are still in place and

we look for euro growth to rise to 1.7% in 2016 from 1.4% this year.

Inflation rates in the US and euro area are currently close to zero due to the

sharp decline in commodity prices but are expected to rise gradually in 2016

as the effects from falling commodity prices fade.

Global GDP outlook vs consensus

Source: Bloomberg, IMF, Danske Bank Markets

Falling Chinese imports hit EM commodity

exporters – like Brazil

Source: Macrobond Financial, Danske Bank Markets

US consumers pulling

Source: Macrobond Financial, Danske Bank Markets

% y/yD anske

B ank C o nsensus

D anske

B ank C o nsensus

USA 2.4 2.5 2.5 2.7

Euro area 1.4 1.4 1.7 1.7

Japan 1.0 0.7 1.4 1.2

China 6.8 6.9 6.7 6.7

Global 3.4 3.5 3.7 3.8

2015 2016


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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 2014 1.1 0.8 0.2 4.0 0.4 2.6 3.8 0.6 5.1 1.8 45.2 6.32015 1.6 2.0 1.2 0.1 -0.5 0.4 -1.9 0.6 4.7 -1.9 38.4 6.62016 1.9 2.1 0.2 2.6 0.3 3.0 2.9 1.6 4.4 -2.4 36.8 6.6

Sweden 2014 2.3 2.2 1.6 7.6 0.1 3.5 6.3 -0.2 7.9 -1.9 43.8 6.22015 3.1 2.1 1.9 5.2 -0.3 4.3 2.8 0.0 7.8 -1.7 43.9 7.42016 2.6 1.7 2.3 4.6 -0.1 4.9 4.7 1.2 7.4 -1.5 43.3 7.6

Norway 2014 2.2 2.0 2.7 0.6 0.2 2.7 1.9 2.0 3.5 - - -2015 1.3 2.3 2.3 -3.5 0.6 1.8 3.4 2.1 4.3 - - -2016 1.8 1.9 2.3 0.7 -0.2 1.8 2.6 2.5 4.2 - - -

Macro forecast, Euroland

Euroland 2014 0.9 0.9 0.8 1.3 -0.1 3.9 4.1 0.4 11.6 -2.4 92.0 2.52015 1.4 1.7 1.2 1.5 0.0 4.8 4.9 0.1 11.1 -2.1 91.8 2.62016 1.7 1.1 0.7 3.7 0.0 4.2 4.1 1.1 10.6 -1.7 90.6 2.5

Germany 2014 1.6 1.0 1.7 3.5 -0.1 3.9 3.7 0.8 5.0 0.7 74.7 7.62015 1.5 1.8 1.8 1.8 0.0 5.8 5.7 0.2 4.7 0.6 71.5 7.92016 2.3 1.5 0.8 5.0 0.0 5.1 5.2 1.5 4.6 0.5 68.2 7.7

France 2014 0.2 0.7 1.5 -1.2 -0.1 2.4 3.9 0.6 10.3 -4.0 95.0 -1.72015 0.9 1.7 1.5 -0.7 0.0 6.0 5.9 0.2 10.3 -3.8 96.4 -0.92016 1.0 0.9 0.7 2.8 0.0 3.6 3.9 1.0 10.1 -3.7 97.1 -1.2

Italy 2014 -0.4 0.3 -1.0 -3.2 0.3 2.4 1.7 0.2 12.7 -3.0 132.1 2.02015 0.7 0.6 0.1 0.4 0.0 4.2 5.3 0.1 12.2 -2.6 133.1 2.22016 1.3 0.9 0.3 2.4 0.0 4.4 4.2 1.1 11.8 -2.0 130.6 2.2

Spain 2014 1.4 2.4 0.1 3.4 -0.1 4.2 7.6 -0.2 24.5 -5.8 97.7 0.62015 3.0 3.2 1.2 6.0 0.0 4.6 5.6 -0.4 22.4 -4.5 100.4 1.22016 2.6 2.0 0.5 6.5 0.0 4.6 5.2 0.8 20.5 -3.5 101.4 1.0

Finland 2014 -0.4 0.5 -0.2 -3.3 - -0.7 0.0 1.0 8.7 -3.1 59.0 -0.92015 0.0 0.4 -0.2 -2.0 - 1.0 -0.3 -0.1 9.6 -3.3 62.5 0.42016 0.8 0.4 -0.5 2.5 - 3.0 2.5 1.0 10.0 -2.9 64.5 0.5

Macro forecast, Global

USA 2014 2.4 2.7 -0.6 5.3 0.0 3.4 3.8 1.6 6.2 -4.1 101.0 -2.32015 2.4 3.0 0.6 4.4 0.2 1.5 4.9 0.1 5.3 -2.9 104.0 -2.52016 2.5 2.6 0.9 5.3 -0.2 3.9 4.0 1.9 5.0 -2.6 103.0 -2.6

Japan 2014 -0.1 -1.4 0.3 2.6 0.1 8.4 7.4 2.4 3.6 -7.0 245.0 0.52015 1.0 0.0 0.9 0.8 0.2 7.6 5.0 1.0 3.3 -6.5 245.0 2.22016 1.4 1.4 1.2 1.2 -0.1 6.0 7.4 1.6 3.1 -6.2 246.0 2.0

China 2014 7.4 - - - - - - 2.0 4.3 -1.1 40.7 1.82015 6.8 - - - - - - 1.7 4.2 -0.8 41.8 2.42016 6.7 - - - - - - 2.3 4.2 -0.8 42.8 2.3

UK 2014 3.0 2.6 1.6 8.6 0.3 0.5 2.4 1.5 6.2 -5.7 89.4 -5.42015 2.6 3.2 1.9 5.1 -0.7 6.7 6.0 0.1 5.6 -4.0 87.6 -4.82016 2.5 2.6 0.1 5.2 0.2 5.1 5.6 1.4 5.3 -2.3 86.8 -4.0

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


No

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utlo

ok

Nordic Outlook

Financial forecast

Source: Danske Bank

Bond and money markets

Currencyvs USD

Currencyvs DKK

USD 23-Sep - 670.8

+3m - 677.7

+6m - 677.7+12m - 648.3

EUR 23-Sep 111.2 745.9

+3m 110.0 745.5

+6m 110.0 745.5+12m 115.0 745.5

JPY 23-Sep 120.2 5.58

+3m 124.0 5.47

+6m 125.0 5.42+12m 127.0 5.10

GBP 23-Sep 153.4 1028.7

+3m 153.0 1035.4

+6m 157.0 1065.0+12m 160.0 1035.4

CHF 23-Sep 97.7 686.9

+3m 97.3 696.7

+6m 100.0 677.7+12m 97.4 665.6

DKK 23-Sep 670.8 -

+3m 677.7 -

+6m 677.7 -+12m 648.3 -

SEK 23-Sep 841.0 79.8

+3m 854.5 79.3

+6m 845.5 80.2+12m 782.6 82.8

NOK 23-Sep 827.8 81.0

+3m 854.5 79.3

+6m 840.9 80.6+12m 765.2 84.7

Equity Markets

Regional

Price trend12 mth.

Regional recommen-dations

USA (USD) Strong USD, muted earnings growth, expensive valuation 5-8% Underweight

Emerging markets (local curr) EM under pressure from change in China's FX policy 0-5% Underweight

Japan (JPY) Reflation, corporate governance, earnings growth, fair value 10-15% Overweight

Europe (ex. Nordics) Reflation, earnings growth, cheap EUR, fair value 10-15% OverweightNordics Earnings growth, expensive valuation 5-10% Overweight

Commodities

Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016

NYMEX WTI 49 58 44 48 53 58 60 62 50 58

ICE Brent 55 63 50 52 57 62 64 65 55 62

Copper 5,808 6,043 5,200 5,400 5,600 5,700 5,800 5,900 5,613 5,750

Zinc 2,091 2,188 1,875 2,000 2,025 2,050 2,075 2,100 2,039 2,063

Nickel 14,410 13,065 10,500 12,000 12,500 13,000 13,500 14,000 12,494 13,250

Aluminium 1,813 1,787 1,600 1,750 1,800 1,850 1,900 1,950 1,738 1,875

Gold 1,219 1,193 1,125 1,110 1,115 1,120 1,125 1,130 1,162 1,123

Matif Mill Wheat (€/t) 190 182 195 205 210 210 210 205 193 209

Rapeseed (€/t) 360 370 395 390 405 420 435 435 379 424

CBOT Wheat (USd/bushel) 523 505 520 550 570 580 590 600 525 585

CBOT Corn (USd/bushel) 385 367 385 400 420 420 420 420 384 420CBOT Soybeans (USd/bushel) 990 966 960 925 950 975 1,000 1,025 960 988

High

Medium

Medium 0-8%

Medium 0-5%

0-3%

0-8%Medium 0-%

868

499

0.98

1.351.45

2.07

1.95

2.20

2.202.50

0.23

-

--

2.40

1.401.60

1.20

1.33

1.20

1.33

0.95

1.151.35

-

--

1.87

2.05

0.49

383

23-Sep

47

9,690

5,078

1,628

1,127

172

49

1,589

20162015

Currencyvs EUR

2-yr swap yield

Risk profile3 mth.

Price trend3 mth.

2.35

2.15

2.60

0.80

0.05

0.10

0.98

-0.68

0.33

0.05

0.050.10

1.25

72.5

2.95

70.072.0

107.0

110.0112.0

110.0

110.0115.0

136.4

137.5146.1

111.2

-

-

--

133.7

745.5

745.5745.5

935.3

920.6

880.0

940.0

925.0

930.0900.0

940.0

108.6

745.9

72.0

1.20

-0.15

1.071.20

1.00

-0.35

1.551.95

1.30

1.501.90

-

-

1.10

-0.30

-0.20

1.05

0.20

0.200.25

-

--

-0.17

-0.25

-0.40

10-yr swap yield

-0.28

0.05

0.050.05

3m interest rate

1.00

0.05

0.10

0.50

-0.75

0.05

-0.04

0.65

0.831.26

0.75

0.75

1.00

-0.75-0.75

-0.35

0.10

0.04

Key int.rate

0.25

0.50

0.751.25

0.75

-0.75

0.05

0.05

0.100.10

0.50

1.00

-0.45

1.00

-0.45-0.45

0.05

0.75

0.33

-0.04

0.08

0.59

364

-0.40

-0.73

-

--

0.07

0.02

0.07

0.62

0.871.44

-0.04

-0.04

0.20

0.15


No

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utlo

ok

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

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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.

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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

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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 @ d a n s k e b a n k . n o

J o s te i n T v e d t+ 4 7 2 3 1 3 9 1 8 4j t v @ d a n s k e b a n k . c o m

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 1 0 5 4 6 7 7 1 5p a k u @ d a n s k e b a n k . c o m

H e n n a P ä i v i k k i M i k ko n e n + 3 5 8 1 0 5 4 6 6 6 1 9h m i @ d a n s k e b a n k . c o m

M i n n a E m i l i a K u u s i s to + 3 5 8 1 0 5 4 6 7 9 5 5m k u u @ 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 + 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

P e r n i l l e B o m h o l d t H e n n e b e r g+ 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

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

F x & c o M M o d i t i e s s t r at e g y

G l o b a l H e a d of F I C C R e s e a r c hT h o m a s H a r r+ 4 5 4 5 1 3 6 7 3 1th h a 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+ 4 5 4 5 1 3 7 8 6 7tu x @ 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

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

K r i s tof f e r K j æ r L o m h o l t+ 4 5 4 5 1 2 8 5 2 9k l o m @ d a n s k e b a n k . d k

d c M 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

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

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 0s r h a @ d a n s k e b a n k . d k

N i k l a s R i p a+ 4 5 4 5 1 2 8 0 4 7n i r i @ d a n s k e b a n k . d k

O l a A a s n e s s H e l d a l+ 4 7 8 5 4 0 8 4 3 3 o l h @ d a n s k e b a n k . n o

H e n r i k R e n è A n d r e s e n + 4 5 4 5 1 3 3 3 2 7h e n a @ d a n s k e b a n k . d k

S o n d r e D a l e S to r m y r + 4 7 8 5 4 0 7 0 7 0s o s t @ d a n s k e b a n k . co m

Ø y v i n d M o s s i g e + 4 7 8 5 4 0 5 4 9 1o m s s @ d a n s k e b a n k . co m

K n u t - I v a r B a k k e n + 4 7 8 5 4 0 7 0 7 4k n b @ d a n s k e b a n k . co m

E m i l H j a l m a r s s o n+ 4 6 8 5 6 8 8 0 6 3 4e m i h @ d a n s k e b a n k . s e

L u k a s P l a t z e r+ 4 5 4 5 1 2 8 4 3 0l p l a @ d a n s k e b a n k . d k

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 @ d a n s k e b a n k . 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 @ d a n s k e b a n k . 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 @ d a n s k e b a n k . 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 @ d a n s k e b a n k . 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 @ d a n s k e b a n k . 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 @ d a n s k e b a n k . s e

S u s a n n e P e r n e b y+ 4 6 8 5 6 8 8 0 5 8 5s u p e @ d a n s k e b a n k . s e

e M e r g i N g M a r k e t s

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

R o k a s G r a j a u s k a s+ 3 7 0 5 2 1 5 6 2 3 1r g r a @ d a n s k e b a n k . l t

Documents

Economic and financial trends - Danske Bank · economy could be hit extra hard via falling house prices. House prices are being very much supported by extremely low interest rates