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Risk Scenarios

Updated view of the economy scenarios, from the perspective of different economic teams .

Today’s from the Nordics Nordea

Key Figures KFS 2016

Risk scenarios :

In our baseline scenario, we expect a modest pick-up in global growth as the cyclical recovery in advanced economies should strengthen and the downturn in Emerging Markets is bottoming out (read more in the global overview section). We outline here what we see as the main macro-related and financial market risks to the baseline that could affect the global growth outlook in both a positive or negative direction. All in all, at this juncture we continuously consider the risks to our baseline scenario as balanced.

Upside risks:

• Stronger than expected growth in commodity importing countries due to the decline in commodity prices

• The current negative growth outlook for China may turn out to be too pessimistic. The authorities might find ways to stimulate growth, though probably increasing longer-term downside risks

• Less than expected tightening by the Fed

• Growth in the Euro area might pick up more than expected – for example owing to easier fiscal policy, positive wealth effects, a weaker euro or pent-up demand being released

• Convincing structural reforms in countries such as France, Italy, Brazil and India

• The situation in the Middle East could calm down, and sanctions against Russia could be lifted.

Downside risks:Image result for Risk Scenarios from the nordics

The downturn in Emerging Market economies may run further, e.g. triggered by a further drop in commodity prices or structural changes in China.

• A hawkish repricing of upcoming Fed hikes or excessive risk-taking by investors hunting for yield may lead to financial market instability.

• Europe could be hit by an uncertainty shock in the wake of the Paris attacks and the strong influx of refugees holding back investments and / or private consumption.

• Also, the EU is struggling to find common answers to thorny issues like the refugees crisis. EU break

up fears may rise also in the wake of the “Brexit” referendum to be held in the UK.

• Geopolitical tensions (e.g. in the Middle East, Ukraine and South East Asia) might escalate, with negative repercussions on confidence

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