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Forward Outlook
Economic & Political Outlook
Denmark
The Economist reports that the minority Liberal-Conservative coalition has only a slim parliamentary majority with support from the Danish People's Party (DF), but will seek broader alliances to pass important legislation.
Fiscal policy is expected to be mildly expansionary and spending on public services is set to rise. Income tax has been cut in 2008 and will be reduced further in 2009.
The Economist Intelligence Unit expects economic growth to remain below 1% in 2008-2009.
The latest national accounts data suggest that
Denmark
was suffering a "technical recession" at the start of 2008, following two successive quarterly contractions of real GDP growth.
Rising food and fuel prices pushed the inflation rate to 3.4% year on year in May. Private-sector wages grew by an average of 4.3% in the first quarter.
Finland
Finland is governed by a four-party coalition made up of Centre Party, the Conservatives and two smaller parties, the Greens and the Swedish People's Party.
The Economist expects there will be moderate tax cuts aimed at boosting employment in the 2009 budget, financed by a large government surplus.
GDP is forecast to slow to 2.8% in 2008 and 2.3% in 2009. Domestic demand, although slowing, is expected to remain stronger than the average for the euro area, with employment growing strongly.
The Economist Intelligence Unit reports that inflation has risen sharply and is expected to remain around 3.5% in 2008 (EU harmonised measure), then fall to 2% on average in 2009.
Employment has risen by 45,000 in a year, nearly one-half the government's target over four years.
Inflation ran well over 3% in the first quarter of 2008, partly owing to rising international energy and food prices, but also to higher housing costs. Nevertheless, there has been a significant slowdown in house prices.
Norway
The Economist Intelligence Unit's central forecast is that the "red-green" majority coalition of the Labour Party, the Socialist Left Party (SV) and the Centre Party will hold together until the September 2009 elections, despite differences over key policy areas.
Over the next two years public spending on local government, health, education, research and environmental projects is expected to increase as the government channels an increasing amount of oil wealth into the economy.
Norway
's economic upswing is expected to moderate in 2008-2009. Consumer spending is expected to weaken as a result of higher inflation, higher interest rates and a cooling housing market. High oil prices are expected to support investment spending.
The current-account surplus rose to 18.5% of GDP in the first quarter of 2008. Goods exports grew by 16.3% year on year, driven by export earnings from crude oil and natural gas.
Sweden
The Economist reports that the
Alliance
for
Sweden
's win in the general election in September 2006 ended 12 years of Social Democratic Party (SAP) rule.
Despite losing support in the opinion polls, the four-party centre-right coalition is likely to remain united behind a comprehensive policy programme. The outcome of the next general election in 2010 is uncertain.
The government is expected to continue to emphasise employment and market liberalisation measures, with tax cuts for low- and middle-income earners and reduced unemployment benefit levels.
The Economist reports that after a period of growth, rising capacity constraints and weaker global demand will contribute to a slowdown in economic activity. Inflation rising to 4% in May 2008, was contributed to higher oil and food prices.
Source: www.economist.com (Country Briefings)
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