Major Nordic economies on bumpy road toward recovery

09:29, June 29, 2011      

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Nordic economies are expected to see mixed performances in the first half of this year, with a slowdown in Sweden, a moderate growth in Denmark and Norway, and a robust comeback in Finland.

All the four economies, which have been adversely affected by the international financial crisis albeit to different extent, has been on a bumpy road of recovery and will most likely remain so, as experts predicted, citing "disappointing" indicators.


The Swedish economy has witnessed a slowdown from its strong growth in 2010 during the first half of this year.

According to a report issued by Sweden's National Institute of Economic Research (NIER), the Swedish economy is predicted to grow about 4.4 percent in 2011 and 2.9 percent in 2012.

This was after a record surge in 2010 with a growth rate of 5.5 percent, the highest since 1970 when the country registered a growth rate of 6.5 percent.

Thanks to strong exports, inventory investment and gross fixed capital formation, Swedish economic growth in the first quarter of this year reached 6.4 percent, 0.8 percentage point higher than the previous quarter.

In the second quarter of this year, the growth rate was expected to drop to 4.9 percent due to weak retail sales reported in spring and early summer.

The construction firms also reported a slowdown in order growth concerning house construction.

Even the traditionally strong manufacturing and private service sectors experienced a clear brake compared to the second half of 2010.

"The Swedish economy continues its recovery from the world recession but at a slower speed now," said Jesper Hansson, director of forecasting at NIER in a telephone interview with Xinhua.

Hansson attributed the slowdown to several temporary factors, including the devastating earthquake in Japan, the political unrest in North Africa and the Middle East, and the uncertainty about government finances in Greece.

The Swedish economy has not fully recovered to the normal level, since the unemployment rate is still at 7.7 percent, he added.


According to the Danish statistical agency Danmarks Statistik, the seasonally-adjusted real GDP contracted 0.5 percent in the first quarter of 2011 from the previous quarter to 427.6 billion Danish kroner (82.4 billion U.S. dollars), following a previous fall of 0.2 percent.

The figures were "disappointing," particularly given the growth witnessed among Denmark's neighbors, professor Jesper Rangvid with Copenhagen Business School told Xinhua.

"It is even more disappointing given that our largest trading partners - Germany, Sweden and Norway - are doing very well," he said.

"Technically we are in what is considered a recession," said Steen Bocian, chief economist with Danske Bank, the largest bank in Denmark.

But Bocian said that the country's situation was much better than in 2008 and 2009.

In fact, the GDP in the first three months of 2011 grew 1.1 percent compared to the same period in 2010, suggesting a gradual picking-up.

Figures from the Danmarks Statistik show that the trade balance in April 2011 registered a surplus of 7 billion Danish kroner (1.4 billion dollars).

A Nordea Bank report also said that Danish exports rose 19.3 percent in the 12 months prior to May 2011, placing exports back at 2008 level, thanks to growth in Sweden and Germany.

Danish GDP figures are very much affected by a cut in public spending and it seemed that public spending has been cut more than planned, Bocian said.

"If that is the case then in the next quarters we will see (an) increase in public spending, because then there will be room for increased public spending," he added.

Bocian said that the Danish economic growth has always been and will continue to be close to the European Union average, which is expected to grow 1.5 to 2 percent in coming years.

The industrial sector in Denmark is challenged by a high wage level and relatively low productivity growth over the past 10 years while The service sector, which is the largest sector, has also been hit by the financial crisis.

"The housing market is still struggling: we have had a 10 to 15 percent price drop in house prices. In the last couple of quarters, house prices have been decreasing very slowly but they are under pressure," said Bocian.

With a relatively less competitive industrial sector, low house prices, rising inflation, a comparatively high unemployment rate of 5.8 percent, a financial market jittery over the European debt crisis, and an up-coming general election, consumer confidence is widely expected to be low.

Denmark's consumer price index (CPI) rose 3.1 percent in May 2011 year on year.

"We are almost entering Q3 2011, and I believe we will have growth in both Q2 2011 and Q3 2011. But it will be quite weak growth and therefore a feeling of a challenged economy," Bocian said.

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