OREANDA-NEWS. February 14, 2011. The SEB Group published its latest Nordic Outlook today, which raises the economic growth forecast for Estonia by 0.5 percentage points for both 2011 and 2012 to projected growth of 4.5%. Interest rate forecasts were also raised for both years by 1 percentage point, to 4.0% and 5.0% for 2011 and 2012 respectively, reported the press-centre of SEB Group.

SEB financial analyst Hardo Pajula:
“SEB’s Nordic Outlook, which was published in Stockholm this morning, is slightly more optimistic again in terms of global growth prospects than the bank’s previous outlook, released last November.

“Particularly marked is the way the economists from the group’s economic studies department have raised the growth forecast for the United States – by as much as 1.4 percentage points. In giving their reasons for this they refer not only to the decision that was taken in autumn to start printing money again, but also to the agreement that was reached between the Democrats and the Republicans late last year to extend the period of tax cuts introduced by George W. Bush for a further two years.

“Even the forecast for emerging markets for 2011 has been raised a little, although the outlook still mentions the possibility of a build-up of social tension due to higher food prices. The European economy is seen as operating at two levels: the high conjuncture of the likes of Germany and Sweden being offset by the budgetary crisis smouldering on the fringes of the Eurozone. Here, though, people remain hopeful that political measures will be able to contain it.

“What stands out in this latest forecast is that compared to the November outlook, which clearly identified deflation as the biggest problem on the inflation/deflation axis, this one paints the picture very much in shades of grey. In a number of areas actual total production is starting to meet its potential, raw materials are continuing to break price records and the gradual recovery of the banking sector is enabling the huge amount of base money that has been put into circulation to regroup into broader pools of money more and more quickly. Bearing all of these factors in mind, inflation may, in the longer term, prove more of a threat than it seemed just a few months ago.

“The outlook sees growth in the Baltic States continuing along the same lines – which is to say based on exports. Although recovery in competitive ability reliant on internal devaluation has come to a halt, the good financial position of their most important foreign trade partners plays into the Baltic States’ hands. That said, domestic consumption is still being reined in by heavy debt in the private sector and the high (if slowly decreasing) rate of unemployment.”