The economic slowdown has hit all the Nordic countries due to
stronger inflation and higher interest rates. The economy is not
expected to pick up until 2010. There are also clear signs that the
unemployment rate will rise in future after several years' downtrend.

Nordea's economists have lowered their forecast of coming years'
economic growth in the publication Economic Outlook published today.
The US slowdown coupled with a European currency at its strongest
level ever has hit the European export sector hard - and a similar
trend is evident throughout most of Asia.
At this juncture it has also become clear that there is no decoupling
of the US economy from the rest of the world.

- The credit crisis is not yet over and the housing markets in many
countries are in serious trouble, which impacts the outlook for both
private consumption and investments activities and it is evident that
we can expect a relatively long period with subdued growth - also in
the Nordic countries, says Helge J. Pedersen, Global Chief Economist
in Nordea.

The Danish economy is in the midst of a sharp slowdown. The main
reason is still the downturn in the housing market, which has
resulted in lower consumer spending growth and falling residential
investment. However, also high inflation and a rather gloomy economic
outlook for Denmark's main trading partners point to lower growth
over the next couple of years. Hence, we also expect unemployment to
rise from the current record-low level and this will over time put a
damper on wage growth. The low-growth period will thus contribute to
easing the currently strong inflationary pressures in the Danish
economy and ensure that exporters' competitiveness is not seriously
eroded. The risk of an overheating of the economy is therefore
fading. Conversely, there is a growing risk of an even more
pronounced slowdown of the Danish economy.

The outlook for the Finnish economy has weakened further. This time
the reason is not merely the duller export outlook; the domestic
economy is also directly hit by the inflation spike and high rates.
Overall, we estimate that economic expansion in Finland will slow to
well below the average level as early as the second half of 2008, and
a recovery cannot be expected until 2010. Still, the Finnish outlook
is fairly reasonable compared to many other countries. Overall, the
macroeconomic balance is in good shape and the housing market has
been more stable than elsewhere in the Nordic countries. Nonetheless,
the risks related to economic growth are distinctly higher than
before.

In Norway interest rates have been raised sharply over the past years
and will be raised one more time due to inflation being higher than
the central bank has expected. Household demand will slow
significantly and mainland investment could fall. Lower growth in
mainland exports will also add to the slowdown in the economy. Strong
growth both in government demand and in oil investment will prevent
the downturn from being too strong. Still, unemployment will rise in
coming years and wage growth will slow somewhat. That will bring core
inflation back down on target during 2009. Norges Bank will then
start to lower its key rates slowly. The spread between Norwegian
short-term rates and rates in the Euro area will, however, increase
and the NOK will be rather strong.

The Swedish economy came to a halt in the first half of 2008 and next
year will only show very slow growth before a recovery will take
place during 2010. Employment has risen sharply during the past few
years, but layoffs have started to pick up and employment growth is
now slowing. We expect employment to decrease somewhat over the next
years, while unemployment is seen picking up. Inflation has been
boosted by rising prices of energy and food, but with stabilising
prices of oil and other commodities, inflation is expected to fall
going forward. We expect inflation to reach the 2 per cent target by
summer 2009. With falling inflation, slower growth and a less tight
labour market we expect the repo rate to be lowered to 3.50 per cent.

View interview with Helge Pedersen on Nordic economic trends at
www.nordea.com/eo/uk - where the report can be downloaded.


For further information:
Helge J. Pedersen, Global Chief Economist, +45 33 33 31 26


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