The Baltics now show clear signs of a slowdown, while the outlook
still seems bright for Poland and Russia. This creates new
opportunities for Nordic companies operating in the region. These are
some of the conclusions presented by Nordea's economists in their
publication Baltic Rim Outlook.

When the domestic overheating calms down in the Baltics, the
preconditions for exports to the countries diminish. However,
prospects for outsourcing production improve as property prices and
building costs fall and labour shortages ease. The opposite is the
case for Russia and Poland. Export opportunities have never been
better in light of the rapidly increasing growth of the purchasing
power of these two countries' large populations.

- Until recently, the Baltic countries were the star performers in
terms of growth among the European Union countries. However, the
economic outlook deteriorated in all the countries in early 2008, and
the adjustment towards slower growth has started. In Estonia and
Latvia the slowdown seems to be much faster than we previously
expected, says Anssi Rantala, who is Nordea's expert on economic
developments in the Baltic countries and Russia. Developments in all
Baltic countries show a similar pattern, though the magnitude of the
boom-bust cycle varies across the countries. The boom-bust cycle is
more pronounced in Latvia and Estonia, whereas in the Lithuanian
economy the upswing and the coming downswing will be more moderate.
Even though the short-term outlook for the Baltic countries is bleak,
growth will resume after a few slow years - and the Baltic countries
will continue to offer business opportunities for the Nordic
companies.

- The Russian economy has shown impressive growth figures during
recent years. The favourable developments are expected to continue.
Strong real wage growth boosts private consumption and lifts more
people into the middle class, says Anssi Rantala. The rise of the
middle class as consumers and producers of goods and services is a
self-reinforcing process and a key to broad-based growth. The biggest
worry in the Russian economy is the surging inflation, which directly
affects consumers' purchasing power.

- The Polish economy expanded more than 6% y/y for the eighth
consecutive quarter in the first quarter this year. This was
supported by the ongoing improvement in the labour market and
continued massive capital inflows. For the full year of 2008 and
probably also 2009, we expect growth to be above 5% despite higher
interest rates, a stronger PLN, weaker foreign demand and higher food
and energy prices. That is how resilient the economy seems at
present, says Anders Svendsen, Nordea's economist covering Poland.
EMU membership may be possible from 2012, he adds.

For further information:
Helge J. Pedersen, Global Chief Economist, +45 3333 3126
Anssi Rantala, Senior Analyst, the Baltic countries and Russia, +358
9 1655 9941
Anders Svendsen, Senior Analyst, Poland, +45 3333 3951

Download Baltic Rim Outlook at www.nordea.com.


http://hugin.info/1151/R/1226743/259760.pdf


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