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WRAPUP 1-Financial crisis slams Nordic economies in Q4

Fri, 27th Feb 2009 10:02

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.


The Danish economy, less reliant on the engineering sector, contracted slightly less than that of its larger neighbour with GDP falling 3.9 percent year-on-year in the fourth quarter. That led to a fall of 1.3 percent for the year -- the worst since 1955.

It was the first year with negative growth since 1993 for Denmark. The closest comparison would be in 1975, when the Danish economy contracted by 1.2 percent during the oil crisis.

Analysts' predictions for 2009 are getting much grimmer, with several forecasting a contraction by as much as 3 percent.

'We haven't experienced two years in a row with such negative growth since World War Two,' said Steen Bocian, chief economist at Danske Bank.

'The way things look now, one can't rule out a drop in economic activity also in 2010, which would be a long crisis deeper than that of the oil shocks in the 1970s.'

Analysts say Denmark still has an advantage in its low unemployment rate. Though many Danish companies are laying off workers to cut costs, unemployment stood at only 2.3 percent in January.


Finland is officially in recession after its economy shrank at the fastest pace in 16 years in October-December and the previous quarter's GDP was also revised to a contraction, Statistics Finland said on Friday.

The rapid economic downturn was caused to a large extent by collapsing exports as the financial crisis spilled over to the global economy -- exports fell 14.2 percent from the same period a year earlier.

'All the parts of the economy were doing badly, and especially exports languished,' said Nordea economist Reijo Heiskanen. 'With this basis, the economy will contract about 2 percent this year.'

Finnish GDP fell 1.3 percent in the fourth quarter from the previous quarter and dropped 2.4 percent from the same quarter a year earlier, the statistics office said.

'The figures were just as frightening and hideous as other indicators already showed,' said OP-Pohjola Chief Economist Anssi Rantala.

(Additional reporting by Gelu Sulugiuc in Copenhagen, Tarmo Virki in Helsinki, Johan Ahlander in Stockholm) Keywords: NORDIC GDP/

(Stockholm Newsroom, tel: +46-8-700 1017, e-mail:

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