Publications
The Economic Research Department regularly produces forecasts of these economies, including an economic outlook of the macroeconomic and financial situation, combined with in-depth discussions on structural and regional issues. Swedbank Markets produces analyses mainly related to financial market developments.
February 26, 2010
Don’t underestimate the importance of moral hazard
- The global financial crisis and Greek tragedy have something in common: the faulty estimation of risk. The reasons why investors and creditors calculate risks badly are many, but one of them deserves more focus, viz., the moral hazard phenomenon
- This version of the To the Point analyses the importance of moral hazard for actions taken on financial markets, focusing on the crises on the private financial markets and with regard to sovereign debt. There are some common aspects, but also some major differences.
February 10, 2010
Ukraine: After the Orange Revolution – political stability necessary for economic recovery
- Ukraine’s presidential election on 7 February appears to have been a democratic success. Viktor Yanukovich, who was removed as president during the Orange Revolution, is the apparent winner. There is a big risk that political turbulence will persist, however, since Yulia Tymoshenko, the other candidate, continues to have support in parliament.
- Ukraine’s economy bottomed out last fall and significant challenges still remain. The real economy has benefitted from a rise in global demand for commodities, while inflation and the exchange rate have stabilised. Huge imbalances persist, however. The budget deficit continues to grow and the natural gas sector is struggling with significant losses and increasing liabilities. Households have been hurt by rising unemployment, real wage decreases and an increase in real debt burdens. The necessary economic reforms will continue to hurt households in the short term.
- Political co-operation will be critical to macroeconomic recovery. But the risks are great. One possibility is that early parliamentary elections are called, which would mean another election campaign. Greater turbulence remains a possibility. An alliance between the candidates would be the best way to agree on a difficult and unpopular economic stabilisation program to mitigate the crisis. In the medium term extensive reforms and liberalisations are needed to produce a higher and sustainable economic growth.
2010 01 28
How to limit post-recession stress
The financial crisis and the global recession have abated, but medium- and long-term challenges remain in the world economy, especially in the OECD countries. The economic situation has improved, but it is way too early to uncork the champagne bottles.
This version of To the Point analyses the different phases and, in particular, the aftermath of the crisis. The last part of this analysis is more geared towards discussions on the actions needed to reduce the post-recession stress. They include: Setting budget goals and expenditure ceilings, communicate exit strategies, combine budget consolidation with structural reforms, improve the functioning of labour markets, and deregulate services markets while re-regulating the financial sector. In addition, policy makers must be more aware of the dangers of building up new imbalances.
January 14, 2010
Improved outlook – but growth will be sluggish
Although economic prospects have improved somewhat during the last months, the policy challenges in all four countries remain large. Sweden has the advantage of having a relatively good fiscal position and has also so far gained because of a weaker krona and a loose monetary policy, but the structural changes in the economy raise demands for aggressive measures to improve competitiveness in the medium term. In the Baltic region, as currencies are fixed, the main policy tool is fiscal policy that can be used to address both short-term needs and medium- to long-term challenges. The crisis constitutes a window of opportunity for much-needed reforms, an opportunity that should not be missed!
December 28, 2009
Happy New Recovery Year!
This last “To the Point” of 2009 will play down discussions on the most reasonable forecast with regard to GDP growth, inflation, sovereign debt, and financial markets. Instead, it will concentrate on the New Year’s resolutions that policymakers and business leaders will have to make in order to create a better world economy in 2010 and thereafter.
December 21, 2009
Domestic economy is the Achilles’ heel
Recent economic developments have been positive in Russia. A rebound of global energy prices has stabilized Russian markets and provided some relief to fiscal balances. Low international funding costs have spurred capital inflows, alleviating foreign currency liquidity constraints.
Expansionary monetary and fiscal policies are mitigating the economic downturn, but risks remain. The growing fiscal deficit will be difficult to reverse, and domestic demand is vulnerable to weak corporate balance sheets, increasing unemployment, eroding real wages, and a banking sector still under recovery.
Against the background of increasing oil prices, the reversal of the inventory cycle, and economic stimulus packages, we are raising our growth forecasts for 2010 to 4.3 % from 1.5 %. Growth is driven mainly by a rebound from the deep falls in 2009. In 2011, we expect the economy to grow at 4.5 %, supported mainly by a continued high oil price. The economic recovery will be protracted unless significant reforms are undertaken to resolve financial sector imbalances and, in the medium term, raise the level of competition and productivity in the Russian economy.
December 18, 2009
Baltic Energy Report
Energy-related issues have become increasingly important for the economy and society. Many discussions about the sufficiency of energy resources and the environment are taking place all over the world – about the impact these issues are having on energy prices, and about the accessibility and efficient use of energy.
The fiscal stance in Latvia – how to return to a sustainable path?
As fiscal policy in Latvia in the years after EU accession was procyclical, the necessary reserves were not created. Consequently, the fall in revenues due to the recession, the government’s need to bail out the largest domestically owned bank, Parex, and the nonexistent opportunity to borrow in financial markets due to the global credit crunch compelled Latvia to turn to the IMF and the EC for help in financing its expanding budget deficit. Latvia must now undertake a challenging fiscal consolidation to put its budget on a sustainable footing and to obtain further funding.
For the government budget to return to a sustainable path, deep restructuring is necessary. This involves both expenditures (e.g., optimizing the public administration, education, and health care sectors) and revenues (i.e., changes in tax policy that support structural adjustment in the economy). Assessing the government suggestions for the 2010 budget, our opinion is that the fiscal policy adjustments are often not structural and therefore will make the journey to a sustainable budget and efficient public sector longer and more expensive. Unfortunately, too often the most attention is given to specific consolidation numbers, not to the achievable result. To ensure lasting recovery, the government’s credibility needs to be boosted. Of course, the 2010 budget should be approved in a timely fashion, but restructuring measures undertaken are equally important. Actions taken now will influence how the economy will look like in 5-10 years.
Swedbank Economic Outlook - The sharp decline is over
During the summer and early autumn, the world economy has shown signs of bottoming out and starting a recovery. As Sweden’s and the Baltic countries’ most important export markets are coming out of the recession, the conditions for growth will slowly improve. A better functioning of the financial sector, increased demand for Swedish and Baltic products, and higher confidence among households, companies, and financial actors, will support a recovery. There is still a dependence on stimulus measures from central banks and governments worldwide: Without these measures, the recovery in Sweden would come to a
halt and the bottoming out of the Baltic economies expected within the next year would most likely be postponed.
To the forecast (pdf)
Brighter outlook for the global economy – but the stimulus
In recent months conditions in the financial sector have improved, several economies have reported growth, and confidence among households, businesses and the financial market has risen. We believe the global economy has reached bottom and that a recovery will begin in the second half of the year.
In the short term, the recovery could be fairly decent, but in the medium term there is an increasing risk of a setback. The reasons for a slow, bumpy recovery are still there: growth is being supported by stimulus measures, many consumers and businesses are trimming their balance sheets, and there is little incentive to add capacity. When this stimulus is unwound, there will be a risk of weaker growth. Global GDP will fall by 1 ¼% this year, but rise by 2 ½% in 2010 and 3% in 2011. Consequently, growth will remain below its potential.
To the full forecast (pdf)
