New Nordic Outlook: Economic slowdown is spread...

The global credit crisis is now entering a new phase. Lending terms
are tightening as the financial sector adjusts its balance sheets to
a new credit and growth environment. The impact on households and
companies will become more clearly apparent, and the slowdown will
not bottom out until 2009. The United States will undergo a mild but
prolonged recession. The cool-down in Western Europe will continue,
and growth will weaken somewhat further in 2009. The fast-growing
economies in Asia will resist the slowdown in Western industrialised
countries relatively well.

The global credit crisis is now entering a new phase. Lending terms
are tightening as the financial sector adjusts its balance sheets to
a new credit and growth environment. The impact on households and
companies will become more clearly apparent, and the slowdown will
not bottom out until 2009. The United States will undergo a mild but
prolonged recession. The cool-down in Western Europe will continue,
and growth will weaken somewhat further in 2009. The fast-growing
economies in Asia will resist the slowdown in Western industrialised
countries relatively well.


To date, the Swedish economy has shown decent resilience. A clearer
slowdown is now on the way as both exports and domestic demand
decelerate. Job creation will slow and unemployment will turn upward
this autumn. This will help alleviate price pressures ahead. Towards
year-end, the Riksbank will start cutting its interest rates. By
autumn 2009, the repo rate will stand at 3.25 per cent. The
government will take advantage of its strong finances for fiscal
stimulus measures equivalent to SEK 30 billion next year to ease the
slowdown.

Despite a fiscal stimulus package and the Federal Reserve's
aggressive interest rate cuts, the US recession will be relatively
prolonged. The adjustment in the housing market is far from over. The
recovery will thus not materialise until the second half of 2009. GDP
growth will reach only 1.0 per cent this year and 0.7 percent in
2009. The Fed will lower its key interest rate by another 50 basis
points towards the end of 2008.

Western Europe is following the US into a growth slump, but the
slowdown will be milder and more delayed than normal. GDP growth in
the euro zone will cool from more than 2¿ per cent in 2007 to below
1¿ per cent this year and just above 1 per cent in 2009. Due to high
inflation, the ECB will wait until October 2008 before cutting
interest rates. By the autumn of 2009, the refi rate will be 3 per
cent.

The dollar will weaken to USD 1.60 per euro in the next quarter.
After that, the focus will shift to economic weakening in Western
Europe and coming ECB interest rate cuts. This will help the dollar
recover a bit. By late 2009, the EUR/USD rate will be 1.45. Bond
yields will turn downward once again in response to weak growth and
central bank interest rate cuts.

The Swedish economy faces a clear slowdown after good growth early in
2008. Exports will lose momentum after a temporary bounce, and
domestic demand will weaken. GDP will grow by more than 2 per cent
this year, then decelerate to 1.3 per cent in 2009. The labour market
slowdown will gradually intensify, and during 2009 unemployment will
climb by more than half a percentage point.

Inflation in Sweden will remain high throughout 2008, driven by
rising food and energy prices. However, underlying inflation pressure
has also risen, mainly because of higher unit labour costs. Inflation
will ease over time due to lower contributions from energy prices and
gradually fading labour cost pressure. Towards the end of 2008,
growth will also have weakened so much that the Riksbank will be
ready to lower its interest rates. In December the repo rate will be
cut in a first stage, and further cuts will occur in 2009 until the
repo rate stands at 3.25 per cent next autumn.

Given strong public sector finances, fiscal stimulus measures are
likely to be unveiled in the government's autumn budget. We expect a
stimulus package equivalent to SEK 30 billion (just over 1 per cent
of GDP) for 2009. Further stimulus programmes are also likely during
the election year 2010. Consolidated public financial saving will
fall from 3 per cent of GDP in 2007 to 1 per cent in 2009.

The Swedish krona will move sideways against the euro during the rest
of 2008, but next year it will strengthen to SEK 9.10 per euro. Due
to the weakness of the US dollar and the British pound, the krona
will achieve its strongest overall level since 2000.

Key figures, Swedish economy
Year-on-year percentage change


+----------------------------------------------------------------+
|                                    | 2006 | 2007 | 2008 | 2009 |
|------------------------------------+------+------+------+------|
| GDP, adjusted for work days        | 4.4  | 2.8  | 2.1  | 1.3  |
|------------------------------------+------+------+------+------|
| Unemployment, % (ILO definition)   | 7.1  | 6.2  | 5.9  | 6.6  |
|------------------------------------+------+------+------+------|
| CPIX (underlying inflation)        | 1.2  | 1.2  | 2.5  | 2.3  |
|------------------------------------+------+------+------+------|
| Public financial saving (% of GDP) | 2.2  | 3.0  | 2.6  | 1.1  |
|------------------------------------+------+------+------+------|
| Repo rate (December)               | 3.00 | 4.00 | 4.00 | 3.25 |
|------------------------------------+------+------+------+------|
| Exchange rate, EUR/SEK (December)  | 9.03 | 9.43 | 9.30 | 9.10 |
+----------------------------------------------------------------+


SEB is a North European financial group serving some 400,000
corporate customers and institutions and five million private
individuals. SEB offers universal banking services in Sweden, Germany
and the Baltic countries - Estonia, Latvia and Lithuania. It also has
local presence in the other Nordic countries, Poland, Ukraine and
Russia and a global presence through its international network in
another ten countries. On 31 March 2008, the Group's total assets
amounted to SEK 2,399bn while its assets under management totalled
SEK 1,331bn. The Group has about 20,000 employees. Read more about
SEB at www.sebgroup.com.
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Mattias Bruer, [phone]
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