Hello, and welcome to this webinar marking the release of our brand new Nordea Economic Outlook. My name is Terry Baynes, and today I'm very happy to have in the studio with me Nordea's Group Chief Economist, Helge Pedersen, to walk us through the report. Just a few logistics to get started. The webinar will last roughly 30 minutes. Helge will give his presentation first, and then we'll take some questions at the end in the Q&A. Without more from me, I will hand it over to Helge. Thank you, Terry, for the kind introduction. It's a pleasure for me to walk you through our new Economic Outlook, The Inflation Standoff, which is a reference to the ongoing fight between market forces and central banks over inflation. Let's start with the big picture. The global economy actually got off to a really good beginning in 2023, driven by the sharp fall in energy prices, strong labor markets, and the reopening of the Chinese economy. That has been reflected in a much better confidence indicators from both business and households this year than what we saw by the end of last year. A large drop in commodity and energy prices, as well as transportation costs, means that inflation this year will nosedive. Actually, we do expect that by the end of this year are seeing inflation rates which are not very far from the target set up by central bankers. Headline inflation is falling off the cliff now. However, core inflation, which is inflation, the headline inflation, minus the development in energy prices and in unprocessed foods, seems to be much more sticky. That's actually what the central bankers they are focusing on right now. It's also to get core inflation down. That's also the reason that we will continue to see interest rate hikes from the central banks, although we are getting closer to the end of the monetary policy tightening cycle. We should, however, also bear in mind that the monetary policy works in the economy with a certain lag of 2-3 quarters, which means that we are only now seeing actually the effect from the hikes in monetary policy last summer. We also are of the opinion that the risk of a new financial crisis is very small, and that's not least due to the much better regulation of banks, not least in Europe than before the great financial crisis in 2008-2009. When looking at fiscal policy, it's our opinion that it's going to continue to support economic activity. We have seen all the crisis packages being rolled out, and then there is the acceleration of the green and digital transformation and hugely increasing defense expenditures. In the future, we will expect to see that it will be public or semi-public demand which will drive economic growth, maybe on behalf of some private demand in form of personal consumption and private investment activities. If we look at the Nordics, and they are facing some headwind now also from the high inflation rates and the increasing monetary policy rates, real estate markets are having a difficult time. We should bear in mind that labor markets are still very strong. They seem to be really resilient also to the monetary policy hikes, and that will eventually prevent a hard landing in the economies. Volatility has been high both in the real economy and also in financial markets over the last one, two years. We do expect to see a high degree of volatility also in the forecast horizon, which covers this year and next. To the exact forecast numbers, which you can see on the left in the table, geopolitics, inflation and the rising interest rates pose the biggest risks. We see risk as quite balanced, if anything, then maybe a bit tilted to the downside. As you can see from the table, our expectation is that the global economy will grow by 3% this year and 2.7% next year. That's almost the same as in our January forecast. As you can see, it's a slight downgrade of the forecast for this year of around 0.2 percentage points. 2022 ended on a better note than what we expected in January. Over the forecast horizon, it is almost the same profile as we had in January. The reason that we expect lower growth in the global economy next year is due to the late impact of the monetary policy hikes. Just to underpin our forecast, we can look at the global PMIs, at the Purchasing Managers' Index as of April this year. What can be seen from the graph is that we are on the so-called composite index, which is a weighted average of the service and the manufacturing indices. We are well above 50 and 50. This is threshold between increasing and decreasing economic activity. What also can be seen from the graph is that it is this recovery in the global economy is almost entirely driven by the service sector. The manufacturing sector is still having problems, and that can be seen also in the development in world trade, which after a solid recovery last year, which was not least due to the sharp buildup of inventories, then we have this year seen a drop in activity. That's a drop which also will affect negatively the Nordic countries, which are all small open economies, heavily dependent on trade. We expect a pickup again in activity in world trade later this year, but for now there are some maybe difficult months ahead of us. I've already mentioned that we expect inflation to nosedive this year. If we look at the latest numbers as of April, we can see that we are well below the peak which was reached by October last year, with almost 11% in the Eurozone and a little earlier with around 9% in the U.S. The latest numbers tells us that inflation has dropped to 7% in the Euro area and 5% in the U.S. Still high rates and high since the early 1980s and way above the central bank's targets of 2%. The reason behind this drop in headline inflation is that transportation costs, they have really nosedived. Freight rates, both when it comes to bulk and to containerized freight, are back on the pre-pandemic levels. All the problems we had with the huge price pressure from transportation and all the supply-side bottlenecks, they now seem to be solved. Also commodity prices have nosedived. The natural gas price in Europe is down by close to 85% since the peak last autumn. If we look at the total index for commodities, which in this slide includes energy, then we see that it's down by close to 60% since when Russia invaded Ukraine, and the commodity prices peaked around the 1st of March last year. Monetary policy is now fully focused on fighting the very high inflation rates. As we have seen, then input prices are declining somewhat now, but there is still a lag from when commodity prices increase until we have seen the full pass-through to consumers. Since labor markets are very strong all over in the world, there is clearly a risk that wage growth will be high, also driven by the surge in the service sector, which means that there is clearly a risk of so-called strong second-round effects. That is why the central banks are so rough in their rhetoric as they have been. Recently we saw that Jay Powell, you can see here at the top right picture, he has said that the U.S. is likely to have a pause now in their monetary policy rate hikes. Still, we believe that the Fed is going to hike by another 25 basis points later this year. That would be the terminal rate for Fed 5.50%. While in the Eurozone, we expect ECB to continue to hike over the coming 2 meetings, which means that the terminal rate in Europe will stand at 3.75. Our forecast for monetary policy rates can be seen here in the table. As mentioned, a terminal rate in the U.S. of 5.5%, 3.75% in the Eurozone. When it comes to Denmark, then it's our expectation that Danmarks Nationalbank is going to follow suit with ECB and hike by another 50 basis points. There is now quite a stable environment around the Danish krone, so no reason for Danmarks Nationalbank to widen the negative spread to the Eurozone. In Norway, we now have a terminal rate of 4%. In Sweden, 3.75%. For the UK, we expect another 25 basis point hike. We are approaching the end of the monetary policy rate hiking cycles. But there is still some way to go. When it comes to 10-year government bond yields, our expectation is that we are close to the peak already now, but that there will still be quite some volatility in the development, and we will see that also 10-year government bond yields are going to be higher by the end of the year than they are right now. When it comes to the US, we have a peak of around 4.2% in our forecast. In the Eurozone, around 2.70%. Also in the Nordic countries, we will see the peak close to the end of this year. Expect that also 10-year government bond yields, they can be quite volatile in the future, and that we haven't reached the peak yet. If we look at the FX markets, after a period where we saw a significant strengthening of the US dollar, it has changed somewhat. The euro has taken the lead also because we now see that ECB is a little more aggressive than the Fed also in the rhetorics. We now stand at a level of around 110 for the euro against the dollar. Our expectation is that the EUR can strengthen a bit further, and we have a target of around 115 in our forecast. We have seen a quite dramatic weakening of the Nordic currencies. Both the SEK and the NOK are close to historic lows against the EUR. We have in Economic Outlook a theme about the situation around the NOK, what has weakened that so much. To a large extent, it is about the monetary policy. We would expect that over the forecast horizon, that both the NOK and the SEK should strengthen against the EUR and also against the USD, as the EUR is strengthening against the USD. Our exact forecast can be seen from this table. 115 as the level for EUR/USD to reach. As SEK and NOK, which are going to strengthen somewhat from here. The Danish krone is rock steady against the euro, so we keep 7.45 throughout the entire forecast horizon. Now when talking about the Nordics, and also inflation has been way too high, as can be seen from this from this slide. Not least in Sweden, here you see the headline inflation rate for Sweden, and this headline inflation for all of the countries which you're seeing. Bearing in mind that both Riksbank and Norges Bank are having more focus on some of the other inflation measures. To make things comparable, we have the headline inflation rates in this slide. You can see, not least in Sweden, inflation has been really dramatically high, which to a large extent can be explained by the weakening of the Swedish krona, which means that the imported prices have risen somewhat faster in Sweden than in the other Nordic countries. In Norway, the thing is that the Norwegian government has supported households quite significantly when it comes to the electricity bill, which means that what you actually see is a very low but also kind of artificial low inflation rate in Norway. The important thing is that we are close to or that we are already have passed the peak also in the Nordics. Still, the Nordic central banks are going to continue hiking interest rates. Here again, we should remember that there are different monetary policy regimes in the Nordics. Sweden and Norway having their independent monetary policy, their own currencies. They have an inflation target of 2%. Finland is a member of the euro area, and Denmark has a fixed exchange rate regime, with the krone pegged to the euro. I have already mentioned Norway. Norges Bank is going to hike rates to 4% according to our forecast, and we have a terminal rate for Riksbanken at 3.75, i.e., on par with the rate we expect the ECB to end at. The high inflation rates and the much high interest rates makes up a kind of a toxic cocktail for the housing market. As we can see from this slide, then house prices have already fallen quite much in a country like Sweden. Also in Denmark here, we have only data for Denmark till the end of 2022, but we know that the fall has continued into the beginning of the year. Also in Finland, we do see that house prices are falling. In Norway, the situation is a bit different. There was a fall in house prices during the end of 2022, but already now it seems to have flattened out, and the latest data actually shows that prices have started to increase a bit again and again. It's probably the fact that labor markets are so resilient. That means that we haven't seen really a sharp drop also in the Norwegian house prices. In Norway, wage growth is going to outperform wage growth in the other Nordic countries. This year we expect wages to increase by around 5.5% in Norway. As can be seen from this slide, the employment situation is really good in the Nordics, so record high employment all over, and not least in Denmark and in Sweden. We have seen a strong increase in the number of employed people since the pandemic. Unemployment rates are low, close to record low in the Nordic countries. The combination of the strong labor markets and the loss of purchasing power last year due to the high inflation rates actually means that there will be quite generous wage agreements for this year and next. I have already mentioned 5.5% in Norway. Over the coming 2 years, we expect wages to grow by around 10% in Denmark combined, in Sweden around 7.5%, and then a little less in Finland. So in particular, in Denmark and Norway, we see a strong wage pressure. And that will also help private consumption, which has been hit, no doubt about that. In particular demand for goods have declined in light of the sharply increasing prices last year. Each and every week we are monitoring in Nordea our clients' card transactions. The data shows us that if we are deflating the numbers, then as can be seen here, then the demand for goods is actually right now below what they were in the same weeks or months in 2019, i.e., before the pandemic. Surge in demand for goods during the lockdowns when households and businesses were compensated by the governments for the loss of income or profits during the pandemic, during the lockdowns. This money couldn't be spent on traveling or events or other kind of experiences. The service demand was depressed, but then money was spent on goods instead. Now it has reversed. Services have been in high demand, we know from the data that people also in the Nordics say not least want to travel a lot. Money are being spent on experiences rather than goods these days. That's also private consumption. Just to sum up on our new Economic Outlook, the global economy has got off to a good start in 2023. Uncertainty for the rest of the year remains high, and that is not least due to the impact, the lagged impact from this quite significant tightening of monetary policy. Inflation has peaked at least when it comes to headline inflation, but seems to be quite stubborn, not least when talking about the so-called core inflation, which to a large extent will be driven by the development in wages, and they seem to grow by a higher rate this year and the extent seen for many, many years. We are getting close to the end of the monetary policy tightening cycle. However, there are probably some way to go still. We expect, as mentioned earlier on, ECB to hike by another 50 basis points, then it is most likely that Fed is going to continue its hiking cycle and end with another 25 basis points hiking. The risk of a new great financial crisis is, to our mind, very, very small. Banking regulation has improved a lot since the financial crisis and not least the European Bank seems to be very well consolidated. Fiscal policy will continue to support growth, seeing the crisis packages, but also the acceleration of the green and the digital transformation and the increased defense expenditures are going to take up lots of resources from the economy, and resources which are not ample and not available right now. Expect public or semi-public demand to crowd out private consumption, private investment activity, during the coming years. The Nordics are facing some headwind these days from the high inflation and from the high interest rates. However, labor markets remain resilient, and that is likely to prevent a hard landing in the region. If we look a bit longer out, the perspectives for the Nordic region is really good due to the comparative advantage which the countries are having in the green and the digital sectors, but also due to the really solid macroeconomic balances in the region with at least a number of the countries running huge surpluses, both on the current account and also on the public finances. That's always a good starting point. When it comes to the risks to our forecast, the primary ones are geopolitics, inflation, and the effect from the monetary policy tightening. We do see risks as quite balanced, but if anything, maybe a bit tilted to the downside. With these words, it ends my presentation, and it's now time for a Q&A session. We have already got a few questions. One of them is related to the outlook for bonds. I have mentioned that we do expect that the yields will continue to rise in the early phase of our forecast horizon, so here over 2023. Then we could see declining longer-term bond yields throughout 2024. We also think that it is premature to expect any kind of monetary policy rate cuts already this year. The first ones will only be taken next year. There is a question on deglobalization and whether that will primarily take part in the physical world and not so much in digital services. I do believe that it primarily will mean that there will be less flow of goods in the years to come across the world, or at least we will see this kind of what is named friendshoring that instead of outsourcing just to other low-cost countries, companies who want to produce abroad in the future will do that in political allied countries. Expect to see a kind of deglobalization going on in the future. But it's not that we will completely stop trading between countries. There could also, of course, be kind of trends in deglobalization of some digital services that could be in tele services, for instance, which also can have such a security dimension. But I think that when we talk deglobalization, it is primarily related to trade in goods rather than in services. Then there is another question, whether we expect to see higher risk on corporate real estate market. Yes, there is definitely also risks related to the corporate real estate market. In these days where we have seen interest rates being increased by 3%, 4% over the past year or so, it will eventually also have quite a significant impact also on corporate real estate. That both when it comes to prices, but also when it comes to activity in the coming years. Finally, there is a question related to exchange rates. That is the EUR/USD forecast and how that is going to look for the coming years. I think I have already mentioned it, but it is our expectation that the strengthening of the euro is going to continue. We have a target of around 115 versus the dollar. We also know that the FX markets, they are characterized by a high degree of volatility, so it can be both up and down from that. That is based on the development in the economic growth and also in monetary policy. That is our best forecast. By that, I will end the Q&A session. I would like to thank you all for joining this webinar, and your feedback is, as always, very appreciated and important for us. There will be a short survey coming up in a few minutes. We would kindly ask you to answer the questions in that survey. By that, I will again thank you for participating in the webinar and hope to see you again when we publish our next Economic Outlook in September this year. Thank you.