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Equipment Finance News Global uncertainty leads to “time of fear” for economies Published: 25th September 2019 Share Growing evidence that a Europe-wide recession could be on its way is creating unease in the financial markets of Nordic countries, according to a new report. Despite the concerns, experts at financial services group Nordea say in its latest Economic Report that they are “modestly optimistic” and believe a global recession can still be avoided, despite the current economic climate in key economies including Germany. There is a changing picture globally, with the US doing well as a result of its positive domestic economy, while China there are signs of an economic slowdown in China. In Europe, Britain is facing a no-deal Brexit, and Italy could be heading towards early elections. Helge J. Pederson, group chief economist at Nordea, said: “There is a real risk that the relationship between the US and China, which basically is a struggle for global dominance, could turn even worse. “The trade war, Brexit, and overall political uncertainty have significantly dampened the global growth outlook. This has once again sparked fears in the financial markets and caused central banks to make a U-turn. Monetary policy normalisation has been put on hold, with further easing in the form of rate cuts on both sides of the Atlantic and a restart of the ECB printing press in Frankfurt now on the cards. “These are some of the reasons why we see a bigger risk of growth surprisingly on the downside rather than the upside in the coming years. All things considered there are indications that globalisation has peaked.” Risk Factor Type of Risk Likelihood Magnitude Escalation of trade war – tariffs on cars and focus on currencies Downside Considerable High Rapid tightening of financial conditions Downside Medium High Recession in Euro area Downside Medium Medium Boost to confidence from more central bank (and fiscal) easing Upside Medium Medium Faster US growth due to easier fiscal and monetary policy Upside Medium Medium Quick removal of tariffs between US and China Upside Low Medium Nordea’s report looks in detail at the performance of Nordic economies and how their outlook could be affected by global influences. Sweden – Over the course of the year, the slowdown has become increasingly evident, with GDP rising 1.4%. Nordea forecasts that weak activity, falling investment, stagnant exports, and lower employment will stabilise in 2020, with GDP bottoming out at 1%. Despite the uncertainty surrounding negative growth rates, household consumption is expected to increase throughout 2020. Sweden: Macroeconomic Indicators 2017 2018 2019E 2020E 2021E Real GDP (calendar adjusted), % y/y 2.4 2.5 1.4 1.0 1.6 Underlying prices (CPIF), % y/y 2.0 2.1 1.6 1.5 1.4 Unemployment rate, % 6.7 6.3 6.6 7.1 7.2 Current account balance, % of GDP 3.7 3.1 4.6 4.8 5.0 General gov, budget balance, % of GDP 1.4 0.9 0.0 -0.5 -0.6 General gov, gross debt, % of GDP 40.6 38.8 35.7 35.8 35.4 Monetary policy rate (end of period) -0.50 -0.25 -0.50 -0.50 -0.50 EUR/SEK (end of period) 9.83 10.13 1.00 10.50 10.30 Finland – GDP growth is forecast to plummet to 0.5% in 2021, from the current 1.2% this year. Heavily reliant upon trade with the Eurozone, which itself has been struggling in recent months, the country’s number one trade partner is Germany. Considering Germany’s uncertain economy, this could exacerbate the difficulties for Finland’s export sector, and send ripples through the economy. Finland: Key figures 2017 2018 2019E 2020E 2021E Real GDP, % y/y 3.0 1.7 1.2 1.0 0.5 Consumer prices, % y/y 0.7 1.1 1.1 1.3 1.3 Unemployment rate, % 8.6 7.4 6.5 6.4 6.4 Wages, % y/y 0.2 1.7 2.5 3.0 2.8 Public sector surplus, % of GDP -0.8 -0.7 -0.6 -1.2 -1.3 Public sector debt, % of GDP 61.3 58.9 58.5 58.4 58.7 ECB deposit interest rate (at year-end) -0.40 -0.40 -0.60 -0.60 -0.60 Denmark – Unlike its neighbours, Denmark’s economy seems well-positioned to withstand the worst of any slowdown. With strong savings indicators and a diverse exports portfolio, GDP growth is forecast to suffer a minimal drop from 1.8% this year to 1.5% in 2020. However, the country is certainly not immune to the “vagaries of the global economy”, as Nordea calculates a 25% risk of recession in the coming years. Denmark: Macroeconomic Indicators Monetary policy rate refers to the certificate of deposit rate 2017 2018 2019E 2020E 2021E Real GDP, % y/y 2.3 1.5 1.8 1.5 1.5 Consumer prices, % y/y 1.1 0.8 0.8 1.2 1.4 Unemployment rate, % 4.3 4.0 3.8 3.9 3.9 Current account balance, % of GDP 8.0 5.7 6.1 5.5 5.1 General gov, budget balance, % of GDP 1.4 0.6 2.0 0.6 0.0 General gov, gross debt, % of GDP 35.5 34.2 33.7 33.4 33.2 Monetary policy rate (end of period) -0.65 -0.65 -0.85 -0.85 -0.85 EUR/DKK (end of period) 6.20 6.53 6.91 6.66 6.38 Norway – A surge in oil prices and solid earnings in the export sector could be enough to secure a positive outlook for the economy. One of the few expected sticking points is employment, where growth in the workforce may not keep pace with demand, as immigration is at its lowest since 2006. Norway: Macroeconomic Indicators 2017 2018 2019E 2020E 2021E Real GDP (Mainland), % y/y 2.0 2.2 2.5 2.3 2.1 Core Consumer prices, % y/y 1.4 1.5 2.3 2.2 2.0 Unemployment rate, % 4.2 3.9 3.5 3.2 3.1 Current account balance, % of GDP 5.6 8.1 6.9 5.9 6.0 General gov, budget balance, % of GDP 4.9 7.3 5.9 5.1 5.1 Private consumption, % y/y 2.2 2.0 1.9 2.4 2.5 Monetary policy rate, deposit (end of period) 0.50 0.75 1.50 1.75 1.75 EUR/NOK (end of period) 9.82 9.90 10.25 9.75 9.60 Download Nordea’s Economic Outlook. Asset Finance Connect Asset Finance Connect brings you news and updates about UK and European auto, equipment and asset finance providers. Sign up to our newsletter Featured Stories NewsUS equipment finance confidence hits three-year high NewsAlba Leasing and Banca Sistema announce partnership NewsDLL and Kempower partner to drive EV charging accessibility Equipment Finance
