“Economic Outlook”: the recession is over
On September 3, Nordea Bank representatives presented the conclusions of the latest Nordea economy review “Economic Outlook”. Nordea’s economists note that the spring optimism was justified. The determined efforts of last autumn by the governments and central banks around the world to counter the crisis have been tremendously successful because they have succeeded in fending off continued depression in the world economy. However, it should be emphasised that it is still too early to celebrate the arrival of a lasting and robust economic upswing. The world governments and central banks will have to define the appropriate exit strategy away from their current expansionary economic policy to avoid new global economic recession.
Nordea Markets Chief Economist Roger Wessman noted that the so called pre-emptive indicators, e.g. Purchasing Managers' Index, show that, in the second half of the year, in the US and Eurozone, a mild growth will be observed. “Nordea forecasts an improvement of the economic growth in these markets in the second half of the year. We have also observed a substantial fall in the production capacity use and an increase in unemployment which allows us to conclude that the level of inflation will remain low in the nearest future. Wherewith we expect that the base interest rates in Eurozone, as well as the US might remain on the current low level for another year. Firstly, the central banks will abandon their quantitative easing measures or the inflowing the additional monetary funds in the economy, and then hike the interest rates.”
Nordea Bank Chief Economist Andris Strazds said that in comparison to the previous Economic Outlook issue Nordea has reduced its Latvia’s economy development forecasts for 2009. “In the light of the poor indicators of the second quarter and the adverse effects of the budgetary cuts on the domestic demand, we have reduced the forecast of Latvia’s economic fall for 2009 to 18%. The recovery of the economy will most probably start only in the beginning of the next year when the domestic demand will have reached the bottom, while the growth in the export sector will continue.”
“At the moment, for Latvia it is very important to approve the budget for 2010 as soon as possible and to clarify the new “rules of the game”, including issues related to tax policy, where all changes should be implemented no later than on 1 January next year. Before this “homework” is done, it will be hard to renew the investors’ confidence in Latvia, and to speak about the revival of the crediting market. The approval of the budget for 2010 with a reduced deficit will be the main prerequisite to receive the next part of the international loan to finance the deficit in the next year’s budget. Only when the Parliament will have approved the budget for 2010 we will be able to say that the hardest in the financial market is behind us,” explains A. Strazds.
Issued by Source www.Nordea.lv / Published to the Site www.naibaltics.com by NAI Baltics – commercial real estate services in the Latvia, Lithuania, Estonia. Your trustworthy partner, advisor and consultant in the Baltics and Worldwide. http://www.naibaltics.com