Nordea: Brighter outlook for Nordic exports

Chief Economist, Helge J. Pedersen. Photo: Nordea.

Chief Economist, Helge J. Pedersen. Photo: Nordea.

An improved outlook for the global economy will brighten the outlook for Nordic exports in the coming months. Still, a turn for the better in unemployment in the Nordic countries is not to be expected until 2010. This is what the Nordea economists conclude in Economic Outlook.

“We can now see that the spring optimism in financial markets was justified. Many economies around the world have now emerged from the recession, supported by a highly expansionary and to a large extent coordinated economic policy implemented by governments around the world,” says Helge J. Pedersen, Global Chief Economist in Nordea.

The next big challenge for governments and central banks around the world is to define the appropriate exit strategy away from their current expansionary economic policies. It is crucial to avoid another financial market collapse and a new global economic recession.

The storm that has ravaged the Danish economy for about 18 months finally seems to peter out. The improved outlook for the global economy will also brighten the outlook for Danish exports, and the gradual improvement of the financial market situation has also filtered through to Denmark, resulting in lower interest rates. Moreover, during the remainder of 2009 and in 2010 the effect of the government’s rescue packages will also start to show through. Still, a further sharp increase in unemployment cannot be avoided.

With its large export sector the Swedish economy was hard hit by last year’s collapse in world trade. There are now signs that Sweden may emerge relatively quickly from the crisis thanks to the international recovery coupled with highly expansionary conditions at home. Indicators reflect an upswing in the manufacturing industry in the rest of 2009. At the same time households’ growing consumption plans are supported by a fairly high savings ratio. Swedish government finances are adversely affected by a sustained rise in unemployment as well as continued fiscal policy measures.

The recession is over in Norway. After two quarters of declining activity in the mainland economy, growth slipped slightly into positive territory again in the second quarter of 2009. Consumption growth is rising sharply driven by substantial rate cuts. Higher export market growth, a sustained high level of investment in the oil sector and strong growth in public sector demand will also contribute to strong GDP growth. Unemployment will follow an uptrend that looks set to flatten in 2010, though.

The Finnish economy contracted sharply during the winter, especially due to the heavy drop in exports. With the advent of spring, there were increasing signs of the economy stabilising, though. In the second half of 2009 we are set to witness quite a marked turn for the better in the Finnish economy thanks to the pick-up in global trade. However, the brisk rise will not last very long unless final demand in the export markets recovers. Economic growth will be reasonable in the next few years. A turn for the better in employment is not to be expected until well into 2010.

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