Economic Outlook: Unconventional times

The monetary policy environment bodes well for the Nordic countries. – The economic outlook for the euro area will benefit the Nordic countries, which are all small open economies quite reliant on foreign trade, says Nordea’s Chief Economist Helge J. Pedersen.

In Unconventional times, several pages are devotes to the Nordic central banks and their new monetary policies:

• Despite high economic growth the Swedish Riksbank has slashed its policy rate to below zero and launched an admittedly limited QE programme in an effort to drive inflation back up near the 2% target.
• After many years in the slow lane the Danish economy has finally returned to the growth track. The Danish central bank has had to realise that new monetary policy instruments are now needed to defend its fixed exchange rate regime when the reference country for its currency peg introduces negative interest rates and quantitative easing measures.

The globalised world economy forced Sweden and Denmark to act unconventionally, explains Pedersen: – In neither of these countries do real economic developments call for interest rates in negative territory. This illustrates the monetary policy challenges that small economies face in a globalised world, no matter what their monetary policy regime is.

In the report, Nordea’s economists also provide their outlook on the Norwegian and Finnish economies:

• As a result of the slowdown of the Norwegian economy caused by the sharp drop in oil prices, even Norges Bank may be forced to cut its policy rate sharply.  Norges Bank has an inflation-targeting strategy, and it is definitely possible that inflation in Norway will decline to a level where the bank will have to slash rates by more than seems justified by real economic developments.
• Among the Nordic countries, it is actually only Finland that can be said to have a need for a highly expansionary monetary policy line. -The fact that the rate of inflation in Finland is one of the highest in the Euro area merely goes to show that economic paradoxes are still not a thing of the past, says Pedersen

Real growth, %

About Nordea Asset Management
Nordea Asset Management (AuM 174 bn EUR*), is part of the Nordea Group, the largest financial services group in Northern Europe (AuM 262 bn EUR*). The business area offers Global investors exposure to a broad range of investment funds via its active distributors, which include banks, asset managers, independent financial advisors and insurance companies.

Nordea Asset Management has a presence in Cologne, Copenhagen, Frankfurt, Helsinki, London, Luxembourg, Madrid, Milan, New York, Oslo, Paris, Sao Paulo, Singapore, Stockholm, Vienna and Zurich. Nordea’s local presence goes hand in hand with the objective of being accessible and offering the best service to clients.

Its main product is the Nordea 1, SICAV, which encompasses a diverse spectrum of high quality products. Nordea 1, SICAV has constantly grown in terms of volume and has steadily gained in reputation. This growth is the result of the success of its active management of products belonging to the following asset classes: value stocks, growth stocks, theme-oriented funds and dedicated sector funds, as well as multi-asset strategies, long/short strategies, bond and money market funds.

*31.12.2014