Even the virtuous Nordics (including Finland)are feeling the full effect of the crisis. From LSE Macroeconomic News, courtesy of Across the Curve. Remember that especially Swedish banks are heavily exposed in Eastern Europe, with loans there up to the value of some 30% of GDP.
Saturday, 28th February, 2009
By Niklas Pollard
STOCKHOLM, Feb 27 (Reuters) The global financial crisis slammed into the Nordic region with full force in the fourth quarter, with the Swedish and Danish economies contracting at record paces while Finland joined its neighbours in recession.
Hit by a dramatic fall in demand for its many heavyweight exporters, Sweden’s gross domestic product (GDP) shrank 4.9 percent in the fourth quarter from a year earlier and 2.4 percent from the preceding three months, the statistics office said on Friday.
The outcome for the Nordic region’s biggest economy was the worst GDP reading since Swedish statistics office SCB began publishing seasonally adjusted quarterly data in 1993.
It compared with median forecasts of a 2.0 percent decline year-on-year and a 1.6 percent fall on a quarterly basis, as seen in a Reuters poll of economists.
‘It was a very, very weak figure. It was, in fact, weak across the board,’ RBS analyst Peter Kaplan said.’
‘I think that the Riksbank is going to cut all the way to 0.10 percent — in practice, zero rates. All the Riksbank’s models are going to shout ‘cut to zero’, although the weak crown adds a little uncertainty.’
The Swedish central bank has already slashed rates by a total of almost 4 percentage points from September to the current level of 1.00 percent in a running battle to ward of an economic downturn.
Sweden’s industrial sector, which includes top-flight manufacturers such as world number two truckmaker Volvo and carmakers Saab and Volvo, has so far been hardest hit, resulting in the loss of thousands of jobs.