Following one of the coldest winters on record and serious debt problems in a
number of EU countries, Europe is finally sensing the dawn of better things to
come. In Economic Outlook Nordea's economists maintain a relatively optimistic
view on economic growth in the Nordic region.

2010 has so far been a year with much drama on the economic front. The serious
debt problems in a string of EU countries, with Greece as the worst example,
have set the agenda. Add to this one of the coldest European winters on record
and the volcanic eruption in Iceland influencing the European air traffic.

- Against this background, it is even more encouraging that several economic
data now indicate that Europe, including the Nordic countries, is finally
sensing the dawn of better things to come, says, Nordea's Global Chief Economist
Helge J. Pedersen.

The Danish economy is again heading for brighter times. Interest rates are low,
confidence indicators are high, the housing market has stabilised and the main
export markets are showing positive growth trends. At the same time private
consumption has been stimulated by tax cuts and low interest rates, and higher
government consumption is still providing quite a boost to economic growth.
However, these positive factors are accompanied by a sharp rise in unemployment
and next year will bring a consolidation of public finances. Overall, this
paints a picture of economic growth of about 1.7 per cent in 2010-2011.

The recovery of the Swedish economy is relatively strong. Employment has already
started to grow, public finances are close to balancing and house prices are
rising rapidly. The GDP performance was admittedly weak in 2009, but conditions
are in place for healthy growth figures this year. As the stimulus effects fade
in the rest of world and to some extent also in Sweden, growth will slow
somewhat in 2011. GDP is expected to grow by just under 3 per cent this year and
around 2.5 per cent in 2011. The Riksbank seems ready to hike its policy rate
substantially this year. Nordea's economists expect a repo rate of 1.75 per cent
at end-2010.

Growth in Norway seems to be weaker than expected earlier. With lower output at
the beginning of the year and prospects of lower real wage growth, Nordea's
economists have cut the forecast for mainland economic growth to just 2 per cent
in 2010. Interest rates could rise less in 2010 than anticipated. There is less
confidence in the government's commitment to tightening the budget in 2011.
Against this background, growth in 2011 should be broadly in line with growth
this year.

The recovery of the Finnish economy is set to gain strength going forward.
Nordea's economists still expect reasonable 2.7 per cent GDP growth this year
and a further acceleration into 2011 driven by domestic demand. The unemployment
rate is set to peak at a relatively modest level this summer. This helps to keep
the public deficit at about 3 per cent of GDP. Consequently, the future
challenges to balanced public finances will be moderate compared to the other
Euro-area countries.

View an interview with Helge J. Pedersen and download the report



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


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    Press release (PDF): http://hugin.info/1151/R/1411187/363478.pdf