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What Inflation, Interest Rates & Geopolitics Mean for Nordic Businesses | Innovation Summit 2026 — Transcript

by Experian Northern Europe · 8,048 words · 1,110 segments · language en · Watch on YouTube

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0:09What I'm going to talk about is um is
0:13basically I have called it maybe
0:15slightly different theme global macro
0:17trends in an uncertain world. So what
0:20I'm going to talk about is these trends
0:22and then I'm going to link it into to
0:24Europe, Northern Europe and and Denmark.
0:26I think I will try to target to talk
0:28something like maybe 35 minutes. So we
0:31have ample time for for questions at the
0:33end. I'm actually also happy to take
0:35questions as I talk completely up to you
0:38but at least try to to keep your if you
0:40have something on your mind please also
0:43shoot at them um at the end. So what I'm
0:46going to talk about is basically so
0:49economics nowadays. So what I'm doing at
0:51the central bank is obviously looking at
0:54economy and financial system. I have a
0:56background from the private private
0:57sector, financial sector and what I'm
0:59going to talk about is these what I will
1:01call macro trends which is then
1:03impacting the economy. So hopefully what
1:05you get out from my talk is both what
1:08are the global things going out there
1:10and how should we think about that in
1:12terms of growth, inflation, interest
1:14rate and so forth. I'm not sure I'm
1:16going to answer all your questions but
1:18hopefully you will find it when I looked
1:20at the words coming up there before
1:21inspiring and providing some insights.
1:24So the first thing I will I will talk a
1:26bit about this persistent fundamental
1:27uncertainty. I will talk about this
1:29geoeconomic fragmentation. I will talk
1:31about high inflation. Um I will talk
1:34about weak private consumption something
1:36I call global imbalances. And I will
1:38also come to AI and I know you and AI is
1:41a big theme for you. I will of course
1:43talk about it from an economic point of
1:45view because an economic I would say
1:47economic financial point of view because
1:49as it is for for your business and your
1:51areas it is a huge topic in economics
1:54and it's it's something which is um
1:56which is quite difficult to get your
1:58grasp around.
2:00So my first thing I want to mention and
2:02then I will try to conclude based on all
2:04these things at the end. So the first
2:06thing I want to talk about is this I
2:08will call persistent fundamental
2:10uncertainty and what I mean with those
2:12two words is that I think it's
2:14persistent because we are getting shocks
2:17and shocks. So I have been economist of
2:20course my whole career. I cannot
2:22remember that we have seen so often a
2:25new shock happening and I'm also calling
2:27it fundamental because I think some of
2:29the things which are happening currently
2:31is is it's quite it's not some small
2:34things. It's quite broad and I have
2:37listed here what I think they are and I
2:40think that maybe maybe AI is actually
2:43the biggest of them all. I would say
2:45over the next couple of years it's at
2:46least something economists are really
2:48scratching their heads to try to find
2:50out how should we think about that and I
2:51will come back to that later on in my
2:53presentation will actually be towards
2:54the end of my presentation. I think
2:57climate change is certainly also
2:59obviously big. It's maybe I mean some
3:02would say it's very fast moving some
3:03would say it's slightly slower moving in
3:05terms of the impact on the economy and
3:07financial system than AI but it's
3:09certainly there. I will not have time to
3:11talk about that. is actually something
3:12we also looking at quite a lot. But just
3:14in terms of priorities,
3:16what I will call the end of the
3:18rule-based world order, um I think I
3:21will I will talk about that in in terms
3:23of what I will call geoeconomic
3:24fragmentation and and trade conflicts
3:26and stuff like that. So I I will
3:28certainly come back to that. uh wars.
3:31Yes, I will talk about that because we
3:33have a a war or now we have a standstill
3:37but we have some some war going on in
3:39the Middle East and that has natural
3:41clear implications for economics and
3:43inflation and so forth. So I will I will
3:45talk a bit about that. Pandemics I think
3:48is is not something I'm going to talk
3:50about but it's something which are
3:51clearly with us. I mean we it's not that
3:53long time ago we had COVID which was an
3:56huge economic shock and we need to we
3:59need to keep in mind I'm not sure the
4:01world responded that well in terms of
4:02coordination and given the more and more
4:04fragmentation we have in the world can
4:06we really expect that we will react in a
4:09coherent way to such a shock. So these
4:12are the things which I think is creating
4:13this persistent fundamental uncertainty.
4:15As I say I will have time to go into
4:17detail into some of them.
4:20So the first thing I want to talk about
4:22is geoeconomic fragmentation. And what
4:25do I mean by that? I basically mean that
4:27when geopolitics has implications for
4:30economics. So think of it that way that
4:32you have pol policy decisions impacting
4:35what is going on economically.
4:38And the first slide I want to take to
4:40you here is is basically try to think
4:43about that. So now I'm going to show you
4:45some numbers but I think it's it's not
4:47the exact numbers which are so
4:48important. It's more that you get the
4:50broad trend and hopefully take that away
4:52from from my presentation today.
4:55So if you look at this chart here uh and
4:59I always have to think what is left and
5:00right for you but if you look at the
5:02chart to the left that basically shows
5:04you the number of trade if if you look
5:08at world import how many of how much of
5:11world import is basically facing uh some
5:14kind of restrictions and what this chart
5:16to the left shows you is it's something
5:18like 20%. And it has risen tremendously.
5:22And if you look at it more carefully and
5:24you have at the x-axis the the years
5:26there has clearly been some kind of jump
5:28around the two Trump administration. You
5:31can also say it's also maybe linked to
5:33Brexit and other things. And then
5:35there's also something linked to 22 2022
5:38which was obviously UK Russia's invasion
5:40of Ukraine. So these has clearly been
5:43some of the amplifiers of this trend.
5:47uh but but it's quite and and that's
5:49what I mean when I say a more fragmented
5:51global trade. I mean obviously the maybe
5:52the clearest example is that we big
5:55parts of the western world we trade a
5:57lot with less with Russia right Russia
5:59trades more with India with China you
6:02have something you call global south
6:03where they trade a lot you cannot see
6:06that in the western part of the world
6:08and you can see signs of some
6:10fragmentation given to what Trump or the
6:12US administration did last year but in
6:14general you see still a strong a lot of
6:17trade within blocks what I would call
6:19blocks so you can think of it as the
6:21western block and a non-western block
6:24and there there's actually still a lot
6:25of trade but some fragmentation is going
6:27on and what is on the on the right hand
6:30side seen from your side is basically
6:31there's all matter of measures of
6:34geopolitical uncertainty and this is
6:36basically trying to measure trade policy
6:37uncertainty and that has skyrocketed and
6:40maybe a surprising thing is that we have
6:43not seen the global economy falling
6:45apart more more strongly than it has
6:48including the US economy I think many
6:50economies thought last year that this
6:52will be very bad for the US economy. But
6:55I think there's always contradicting
6:57forces in in in economics and clearly
6:59the the one which was pulling in the
7:01other direction was AI, right? Which was
7:03clearly creating a massive boost for the
7:06US.
7:08So how should we think about these trade
7:09wars? and and that's what I'm going to
7:12go into and and tell you a little bit
7:14more about um if you look at the next
7:16slide here and and I will I will explain
7:19a bit because it's it's a little bit
7:21more detailed. So Trump did first Trump
7:23did his trade wars against China.
7:25Remember that in 18 where he basically
7:27targeted China very specifically. And
7:28then of course you had this liberation
7:30day last year the US administration.
7:33And what I show you there in the chart
7:34to the left is the change in the export
7:38Chinese export share to a certain
7:40country and on the yaxis you have US
7:43import from that country. So what is
7:46this chart going to explain? If you look
7:48at VN that is Vietnam. So what is going
7:51on is that China is exporting and this
7:54has changes since basically what
7:56happened last year. So pre-liberation
7:58day. So what is going on is that China
8:00exports now a lot to the to Vietnam
8:03which then exported to China. Right. So,
8:06so there is this a bit of rrooting going
8:08on which is actually interesting because
8:11what chi what what the US administration
8:13did last year was actually trying to
8:15make sure that this did not happen
8:17because they basically put tariffs on
8:19everyone right because this was exactly
8:21if I had shown you the graph from 201819
8:24this was would have been more extreme
8:26but there is still some kind of rrooting
8:29going on as we call it in economic you
8:30can see th is Thailand so that's also
8:33some where something is going on but if
8:36If you look at Mexico, for example,
8:37that's MX, there's not that much
8:40increased exports from China to Mexico
8:42and from Mexico to to the US, which is
8:44obviously something the Trump
8:45administration has been quite focused
8:47on. If you look at the chart to the
8:49right, that shows you in the in the in
8:52the red lines that shows you basically
8:55what has been the change in US import
8:58um from China from 2024 to 25. So you
9:03can see what is and and that's a
9:05negative number if you look at the red.
9:07So that's a basically a lot of actually
9:09high-end manufacturing which is a big
9:12change to what happened in 18 and 19.
9:14Now it's high-end manufacturing which is
9:15clearly where there's a lot less exports
9:17going from China to the US directly. And
9:20you can see on the other axis that some
9:23of these is actually going now. So there
9:27is actually an increased ex import here
9:30from the US through Vietnam. Right. So
9:32if you look for example look at
9:34telephones, computers. So there seem to
9:36be something going on from China
9:38exporting to Vietnam then exporting to
9:40the US. So so so so these are of course
9:44creating these fragmentation right
9:46because it's something which is
9:47happening below this uh this theme of of
9:51of the tariffs
9:53and how how should we try to put it a
9:55bit into a European perspective. So I
9:58think what I show you here in the chart
10:00here is in the left chart it basically
10:02shows you how US trade with the US and
10:05in the right and and it's an index
10:06number. So don't think it's just if it
10:08goes up it is increased if it goes down
10:10it falls. And in the in the chart to the
10:14right is basically Europe's trade with
10:16China. So what it shows is that EU is
10:20actually importing more and more from
10:22the US starting to export less which
10:25after the tariffs came into place it
10:26seem to have had some impact and then I
10:29think China is is a big one out there
10:31right you can see China's export to to
10:34EU has increased very rapidly it had a
10:37dip uh but now it's increasing very
10:40rapidly again and EU's export to China
10:43is much much lower and I think it's it
10:46is a challenge I mean I have myself in I
10:49have been based in Asia seven eight
10:51years of my career during the 200 2000s
10:55and the 2010s and I've seen that machine
10:58in China that's industrial capacity they
11:00have and this is something Europe I
11:02think need to think carefully about and
11:04it's of course a fine balance because we
11:07we also want to I guess be uh be
11:11actually one of those who actually focus
11:13on the on the rule of law and WGO low
11:16comp VTO compliance and so forth. But
11:19there is just a lot of and you can say
11:22to some extent unfair competition coming
11:23from China because we know that many of
11:25their sectors are quite heavily
11:27subsidized and and that is and that's
11:29why why when Muong is now leading the
11:32the the T7 he talks about what he called
11:34global imbalances which I'm going to
11:36come back to later.
11:38So this was one theme I want to talk to
11:40you about that was basically this trade
11:43which is so you can say what is going on
11:45is that when when when when the Trump
11:47administration puts tariff on the US it
11:50means that uh no sorry on China and
11:53China has this huge export capacity it
11:56means that those goods are going to go
11:57elsewhere they are not going to stop
11:59exporting and what is happening now is
12:01it goes to Southeast Asia it's going to
12:03Africa and it's going to Europe right so
12:06so so that's unless Unless they change
12:08their growth model then that's uh that
12:11that's that is what we are facing.
12:14A second theme I want to talk about is
12:16basically inflation. Um I wrote a book
12:19back when we had the the big inflation
12:22spike in 22. Um so I guess the big
12:25question now is given what is going on
12:27in the Middle East can we expect
12:29something similar? Are we now facing a
12:31new period of inflation?
12:34So um and and it's and clearly this time
12:38the trigger is what is going on in the
12:40Middle East. It's coming from energy.
12:41It's coming from oil and gas.
12:45And let me provide you a few points on
12:47that. And that's obviously something at
12:49the central bank we are looking a lot
12:50into. If you look at the chart to the
12:53left it so so when energy prices are
12:56rising when so what is going on now is
12:58that oil prices are rising gas prices
13:00are rising. So that is what we call um
13:03you you can say wholesale prices and
13:05then that trickled down into what
13:08consumers are facing and what I show you
13:11to the left there in the chart is
13:12basically what has happened. So the war
13:14began basically 27th of February and we
13:17now have two months of data. We have fe
13:20March data and we have uh April data. We
13:23don't have May data yet of course and
13:25you can see that it's basically the same
13:27everywhere. Euro area, US and Denmark.
13:30You can see that consumer energy prices
13:33are rising. If you look at the chart to
13:35the to the right, um that shows you also
13:39what we call energy price inflation. So
13:43exactly what is going on in terms of
13:45energy prices. Um that part is rising a
13:48lot. But of course, it's important to
13:51remember that people consume a lot of
13:53other things. So it may be that energy
13:55price inflation is rising to 10 15 20%.
13:58But that is not the inflation we are
14:00facing because it's only a small part of
14:02the inflation a normal consumer is
14:05facing.
14:07So how how should we think about this?
14:09So economist as I am we think of energy
14:12prices and the shock from energy prices
14:14having different legs. So it's first the
14:17immediate impact. So it's basically that
14:20you see your gas bill going up or you
14:22see your when you uh when you go and and
14:25get u gasoline for your car driving you
14:27can see the prices have risen but then
14:30there are a lot of other indirect
14:31effects and that's what I'm going to
14:33talk a little bit about now. If you look
14:34at the chart to the left that shows you
14:37what we call producer price indices. So
14:40that means that is the cost producers
14:42are facing. So think of um if you are a
14:46transport company and you or you are a
14:48airplane company um your your cost of
14:52energy goes up that means that you so
14:55that's producer prices rising eventually
14:57they may raise their prices and how and
15:00and there we can see and I've tried to
15:01show you there in terms of how much is
15:04increasing we are clearly seeing that
15:06that is going up how much that is then
15:08going to translate into that in
15:10inflation is going to rise the inflation
15:11we are facing that depends depends on
15:13how strong our demand is, right? So can
15:16can actually companies despite that they
15:19face higher cost can they raise their
15:21prices? That of course depends on
15:23whether we are willing to pay it.
15:25Another indicator there which we look
15:27closely at and that was something we
15:29really saw in 2122 that was it we call
15:32global supply chain. You may remember
15:33that you heard about that during the
15:35after the pandemic. So there is some
15:38indices created around that and that is
15:40actually also starting to tighten. So it
15:42it does s means rising. It does suggest
15:46that it's a little bit broader than
15:47energy and that's something central
15:49banks like like where I'm I'm based that
15:52is something we are watching very
15:53closely because we become more
15:55broad-based we are we are a bit worried.
15:57Another thing we look at is the chart to
16:00the right uh which basically shows you
16:03how many of uh in what we call a
16:06consumer basket how many of these
16:07indices are actually rising above the
16:09average. So if you see a lot of them and
16:12of for of course be a limit a lot of
16:14them rising a lot that's a warning sign
16:16if you look at the chart and I've showed
16:18you there US Denmark and Euro area it's
16:21especially US where you start to
16:22actually see that many of them are
16:24rising quite a lot but in general we are
16:26not back at um at at what we saw during
16:30uh during uh 22.
16:33Let me go a little bit more into it. So
16:35we are of course we have tons of models
16:37in the central bank where we try to
16:38calculate this because we have a lot of
16:41data and try to say how should we if we
16:45if we look at our normal models how
16:47should a energy uh oil price shock which
16:50we have seen now basically based on what
16:52we have seen now how should that impact
16:55different segments so these are these
16:57indirect effects I ch talked about so
16:59not uh not the gasoline you are paying
17:02when you drive your car but more broader
17:04off and there you can see that it's it
17:06it takes some time but you can
17:08especially see impact on transports. So
17:11that could be for example when you take
17:13a plane you can also see it in food
17:15prices you can also see it in u even in
17:18restaurants and stuff like that and that
17:20is what we are these are in levels term
17:23so these are so these are our estimates
17:26that if you transport for example based
17:28on the current oil price increase that
17:31should increase by 2% or two 2% in terms
17:36of transport within the next 12 months
17:38and a little bit less within 24 months.
17:40So these are the ballpark we are we are
17:42thinking about but I want what I want to
17:45end you on on this topic is basically we
17:49don't think even in a risk scenario
17:51where it pro where it prolongs and oil
17:53price gets higher we don't think that we
17:55will get anywhere close to what we saw
17:57in 22 and that's of course a famous last
17:59word but basically what I'm telling you
18:01is that inflation is not going to get
18:0210% and you can say that would also be a
18:04very bad outcome so it's actually not
18:06much you're saying but I would also say
18:08I think we'll be quite far away from
18:10that episode. And why is that? I think
18:12there's at least four reasons for that.
18:14First, in 22 you already had inflation
18:17when Russia invaded Ukraine, inflation
18:19rising beforehand.
18:21So there was other shocks coming through
18:24and now we don't have that. If you look
18:27at what is happening now also that the
18:29European gas and electricity situation
18:31is very different. It's much more of an
18:33oil shock which is actually similar to
18:34what we saw in 22 but the gas shock is
18:37much smaller which is really also what
18:39matters especially for Europe. I would
18:41also say you probably remember in 2122
18:44interest rates were negative right what
18:46monetary policy what we would call it
18:49would was accommodative that's very
18:51different now we actually have interest
18:52rate at least they are positive and so
18:55they are in a or not at least we
18:57probably like that they are low but uh
18:59but um so it's a different situation and
19:02then the final thing which I'm going to
19:04touch on is that private consumption was
19:06much stronger coming out of covid so I
19:09think there so and that's maybe
19:10something which related to all of this
19:11what happened in 22 was not only Ukraine
19:15uh Russia invaded Ukraine it was also
19:17that we came out of covid and we had so
19:19strong consumption and it was such a
19:22special shock and and all this created
19:24that uh you can say perfect storm of
19:26high inflation
19:29let me go to my third topic which I will
19:31talk about and that's something which is
19:33a bit of a puzzle uh and I we have I
19:36have had five PhDs thinking about this
19:39for three months And I think basically
19:41the answer and I think I was cited for
19:42that in vegan division is still a
19:44mystery. We don't understand why Danes
19:48are consuming so little money. That may
19:51be strange. You probably feel you could
19:53consume a lot of money but given the
19:55wage increases people have seen over the
19:59last several years, there's something
20:02going on which is strange that people
20:03are simply not consuming compared to
20:05what they normally would do. And it is
20:08maybe somewhat linked to some of the
20:09other things I talked about. So the
20:11fragmentation, the uncertainty, the risk
20:14of wars, the inflation spike which was
20:16only three or four months, four years
20:19ago. Is that what is making people
20:22worried? I can say we have not concluded
20:24yet. We have just say that we we think
20:26it's a bit of a puzzle. But let me show
20:28you a few charts. Um the first thing is
20:32basically if you look at the chart to
20:33the left this is the change in the
20:35consumption ratio for the average day.
20:38So that is basically where you compare
20:39how much people consume compared to how
20:42much they earn and that has dropped a
20:45lot. It's actually something like eight
20:46percentage point. These are both precoid
20:49and I think we also have it compared to
20:51the 2010s and you can see Denmark is
20:53actually at the end where it has dropped
20:55the most. That's not clear why that
20:58should be the case. US they always
21:00consume right they even now have a
21:03positive uh uh they have actually had a
21:05positive reaction in terms of
21:07consumption. So one explanation is
21:09clearly that you have had um you have re
21:12so the chart I show you to the right is
21:14basically consumer confidence. So it
21:16shows you that confidence are pretty low
21:19both in the euro area and Denmark. But
21:21again why is that? Why is it when people
21:24are actually earning quite a lot of
21:25money that we are seeing this low
21:28consumption uh low confidence and
21:30thereby also consumption and let me show
21:32you one more chart this basically shows
21:34you where is it we have seen the drop
21:37I'm 54 I'm in the middle uh and I am as
21:41you can see there I'm probably consuming
21:43norm relatively normally but you can see
21:46especially it's the elderly um I don't
21:49know whether it's elderly I'm soon in
21:51that range but let's say above above
21:53late 50s um and in and it's also the
21:57young that's where you have seen the big
21:59fall and we I have tried to look to to
22:02my people and say is it because of
22:04rising inequality no it's not because
22:07the I mean it can explain a very little
22:09because you can say if it was that if it
22:11was that the ones who are earning a lot
22:12of money are the rich ones and they are
22:15not consuming so much of that they are
22:17earning that could maybe explain
22:18something but that cannot really explain
22:20it so it's a bit of a puzzle one
22:22potential explanation for the elderly is
22:24that people work long and longer. The
22:26retirement age are really rising in
22:28Denmark and maybe they're not really
22:30changing their consumption pattern.
22:32That's a potential explanation. Maybe
22:33some of the young people at least if
22:35there if if they living close to
22:37Copenhagen, they are saving for buying
22:40an expensive apartment. That could be
22:42another explanation, but it doesn't
22:44really add up. So, it's a little bit of
22:45a poss. It's a bit of a mystery but it's
22:47something we are noting and you can say
22:50somewhat worrying if these trends
22:52continue and with all the shocks we
22:54having.
22:56I think I have two more themes I want to
22:58cover before I I round up and now I'm
23:01really going into a global theme and of
23:04course Denmark is also linked to this
23:06but so it's a slightly different uh but
23:08let me try to and it's a little bit it's
23:10something I have worked a lot on but
23:12it's something which is a little bit uh
23:15you may not technical but it's it's
23:17really a global thing. So what does
23:20global imbalances mean? It means that
23:23some countries are spending a loss a lot
23:26compared to how much they save. Some
23:28countries are running deficits what we
23:31call current account deficits. And those
23:33countries who are doing that and you can
23:35probably think about a big country the
23:37US they also need a lot of caps in
23:39flows. Other countries are doing the
23:41opposite. They are saving a loss
23:43compared to how much they spend. They
23:45are running surpluses and and they are
23:48sending money abroad. That's actually
23:50also Denmark. But we are just so small.
23:52So we don't matter in the global debate
23:55around this.
23:57So what what has happened over the last
24:00um so this was a big discussion before
24:03the global financial crisis. So what
24:04does I need to explain you a little bit
24:06here. So what does this chart shows you
24:08is basically u in percentage of world
24:11GDP what are the current account
24:14surpluses and deficit from different
24:15countries and you can probably see in
24:17the red line that's why you have the US.
24:19The US is always running deficits. They
24:22are always spending more than they save.
24:25The surpluses are always China. It's
24:27always Japan, typically also some of the
24:30oil exporting countries. But it's
24:31actually also increasingly Europe.
24:34This was a big it is still a big
24:36discussion among economies. Was this the
24:38reasons why we had the global financial
24:40crisis or finance reason as we call it
24:41in Denmark.
24:43It's still debated. I think it had some
24:45impact that US was overspending and some
24:48was over oversaving. You can say it's
24:50not necessarily a bad thing that some
24:52are saving and some are spending, but it
24:54is a bad thing if it create distortions.
24:57If it's or if it's driven by distortions
25:00and I'm going to a little bit back to
25:01that, you can see that it is starting to
25:04rise a little bit, but it's it's not
25:06looking as bad as it did in 2007. So
25:09maybe that's that's a comforting thing,
25:12but not necessarily so because you can
25:14think about that if you consume or you
25:16spend more than you save every year,
25:19it's like that you accumulate debt,
25:21right? It's like it's it's like
25:22something you do every year and then
25:24your debts just become bigger and
25:25bigger. If you think of it for these are
25:29basically global financial uh imbalance
25:32in terms of financial liabilities and
25:34financial assets. So again the red one
25:37is the US. So net foreign debt for the
25:41US is just increasing because remember
25:43they are running deficits. So they need
25:45capital to go into that country. You
25:48look at the the creditor countries who
25:50are they? They are China, Japan, Europe,
25:53right? And so again is this a problem?
25:56It's a problem if it is led by
25:58distortive policies. And I would say it
26:00is to some extent because in the US they
26:02are running way too big um fiscal
26:05deficits. You know in the last couple of
26:07years they have had a fiscal deficit of
26:09something like 6% of GDP despite that
26:11they have a booming labor market,
26:13booming AI, whatever you name it. China
26:16is running massive surpluses and it's
26:19driven by households. Chinese households
26:22are not spending um and this create
26:24these things. So, so what is going on
26:27and the reasons why we are interested
26:29from the Danish central bank is actually
26:30that in a miniature way. This is also
26:34going on in Denmark. We are saving a lot
26:36and where we invest them, we invest them
26:38in US stocks, right? We invest them in
26:41AI stocks. That is to some extent what
26:43is going on and of course it creates
26:46some risk. So the way we think about it
26:49is and the way I think about it is that
26:51there is actually what I would call a
26:52bit of a private savings. So a lot of
26:55households also companies across the
26:57world both the US even in US but also in
27:00Asia and Europe they are saving and they
27:04are investing in primarily risky assets
27:07in the US. It's a little bit of a
27:09simplification uh but but that's to some
27:12extent what what what what is happening
27:15and what does that mean and this is
27:17something which is a little bit for
27:18those of you who are into the finance
27:19part. These are something we look at if
27:21we look at what we call risk premium in
27:23different asset classes these are
27:25showing it in equities. is are showing
27:27it in what we call corporate bonds, high
27:29yield corporate bonds. they are pretty
27:31low and it may be so again why why are
27:34we there the what we are arguing is that
27:36you have all these savings in the in the
27:38world also from Denmark but of course
27:41also more important for much bigger
27:42countries and they are channeled into
27:45you can say risky investment in the US
27:47some would say of course that these and
27:49and we don't take a stance on that this
27:51is because they're delivering so much
27:53return but it is just investment going
27:55into the US and at some stage it's
27:57something to be aware of that there is
28:00this you can say disharmony in terms of
28:02global imbalances and and um and capital
28:05flows.
28:07I will end with AI. Uh this is my final
28:11uh in my 204 around global macro themes.
28:15Um, so AI is
28:19is yeah, I think it's it's it's it's
28:22it's extremely complicated to think
28:23about this from an economic point of
28:25view because there's so many things we
28:27don't know and I'm interested in it both
28:29from economic point of view, but
28:31actually also because I'm part of the
28:33leadership team in in the central bank
28:36and I'm really pushing for also how much
28:37we roll it out in the organization.
28:40Right? So I'm I'm I'm interested in it
28:42both from an economic point of view but
28:44also like like a manager point of view
28:46how because I think it has so huge
28:48potential because the central bank is a
28:50knowledge it's a knowledge hop right and
28:53it's so that you should think that it
28:54should be able to help us so I'm
28:56interested in many many different ways
28:58I'm saying I would also say I use a lot
29:00myself uh when I think and write and uh
29:02and so forth so so um yeah
29:07let me let me try to give you a few
29:09economic perspectives so The chart to
29:10the left here shows you um the
29:14relationship on the on the x- axis it
29:16shows you GDP per capita on the y- axis
29:18you have much companies uh use AI
29:23basically and you can say this is well
29:25known that the richer the countries are
29:27the more the more they can use it that
29:30there is that clear tendency and Denmark
29:32as you can see is is pretty high up
29:34there um where we are interested in it
29:37from from the central bank perspective I
29:39would They are different things. It's
29:41both a little bit what I read what I
29:42talked about before the all the AI
29:44investments and and the capital flows
29:47into the US also look looking at it at
29:49trade productivity gains which I'm going
29:52to talk to you about uh just in a sec
29:54because that's where we have done some
29:55work then we are increasingly doing work
29:58on think about the Danish labor market
30:00or the European labor market what are we
30:02seeing in terms of the labor market
30:04impact of AI and then we are interested
30:06about it from the financial sector point
30:08of
30:09And there I it's also tricky uh but I
30:13don't we have not done so much work
30:15there yet. I mean of course we are very
30:16interested in also from the cyber risk
30:18perspective but in terms of the
30:20financial stability risk we u we need to
30:23do more work in that in that area.
30:27So so how should we think about
30:29productivity gains and AI? It's it's a
30:32little bit anybody's guess to to be
30:34honest. the two last Nobel Prize winners
30:36in economics
30:38um Asam Muklu who won it in 2024
30:42and um Akyong Philip Ayong who won it
30:44last year together with a few others
30:46they have so diverging views so you have
30:49two Nobel Prize winners over the last
30:50two years in economics and they in one
30:53in each end so I'll come back to that so
30:55one way to think about it is to look at
30:57previous you can say huge technological
31:01or
31:03advances so for example, the wave of
31:06electricity in Europe or the IT
31:08revolution in the US and you can see
31:10there was it seems these are labor
31:13productivity. It seems that there were
31:14clearly gains.
31:16If you look at the chart to the right
31:18and that is you have probably seen
31:20similar charts but if you look at it it
31:22seems that generative AI uh as a general
31:26purpose technology is actually becoming
31:28more widespread. Sit chat GBT was
31:30introduced in November 22 or something.
31:32It has moved quite fast. So could that
31:35make it faster? Who knows?
31:38So what does economist think about these
31:40things? What what are what are the
31:42answer? How should we think of this?
31:44This is if you look at the chart to the
31:46left that basically shows you what
31:48economy thinks about what what what is
31:51the total factor productivity? And total
31:54factor productivity is basically not
31:55exactly the same as labor productivity.
31:58Total factor productivity is that you
31:59have you have a worker and you have some
32:02capital and then how much added do you
32:05get in terms of productivity every year.
32:07So you cannot just have if you just
32:09invest more that does not get total
32:11factor productivity. It's those two
32:13combined and then how much do you get on
32:15top of that and if you look at see there
32:18I have the name of Asim Muklu who won
32:20the Nobel Prize in economics in 24. He's
32:23basically saying ah not much it's.1.2 2
32:27per year percentage point. Um Ayong who
32:31won the Nobel Prize last year I think
32:33he's more like close to one percentage
32:35point. We have tried to go through all
32:37these models I don't think we have a
32:40clear answer but maybe one could think
32:42about some I mean one of the most cited
32:45papers is actually something where it's
32:46point4 percentage point per year and
32:48that's quite a lot because if you look
32:50at the charts to the right and these are
32:52estimates for what we call total factor
32:54productivity. So these the chart to the
32:57left that's something which could happen
32:58for every year over the next seven eight
33:00years. chart to the right is basically
33:02showing you how much we have seen over
33:04the last what has been the average total
33:06factor productivity and if you imagine
33:08that the red line was just lifted by
33:10point4 per year that that's a lot and I
33:14would say even it's 0.1 2.3 it's it's
33:17it's quite a lot but so the stance we
33:20are taking is that we we think there
33:22will be some productivity gains clearly
33:23from AI but you know the the old famous
33:27economist Robert Solo he said the only
33:29when we had the IT revolution he
33:31basically said the only the only places
33:33where we cannot see productivity gains
33:35in is in the productivity numbers so
33:37everybody said that there was
33:38productivity gains but we couldn't see
33:39it in the numbers and and it's a little
33:42bit the same now again I think most
33:44economies so for example we see higher
33:47productivity growth in in the US now I
33:50think most economies are a bit skeptical
33:52that that is really at a macro level
33:54driven by AI but it should come and I am
33:57I think I'm in the bullish camp I I
33:59think there will be an impact.
34:01So my conclusion I took you a tour for
34:04around different themes in the global
34:06economy. Hope it hopefully gave some
34:07inspiration. Um I think the overall
34:10conclusion is of course that the global
34:12economy is facing an I think an extraord
34:14extraordinary degree of uncertainty. I
34:16think there are clear downside risks to
34:18growth coming from this geoeconomic
34:20fragmentation and the war in the Middle
34:22East. But there's also clear upside risk
34:24coming from AI. Um and then there is
34:27this upside risk to inflation coming
34:30from the war in the Middle East. Um and
34:32then I think these global imbalances
34:34pose some financial risk which I
34:35hopefully also got most of the
34:37conclusion on. So I think the way we see
34:40the global economy and the Danish
34:42economy now is that it's moderate
34:45growth. So despite all the shocks and
34:47you can create a lot of tailwind and
34:49headwinds, I think at the end of the day
34:51we have moderate growth in the global
34:53economy. We also think the Danish
34:55economy is looking quite healthy, close
34:57to 2% growth, but of course there is a
34:59lot of risk scenarios around that. I
35:01think I'll stop here.
35:11>> That was really interesting. I think
35:13it's uh it's fair to say that there's a
35:17lot of uncertainties about everything.
35:19Everybody has their own opinion about
35:20you know the direction of the economy
35:22etc. Uh we have time for questions. So
35:25this is a great opportunity if you have
35:28any type of questions to Thomas.
35:32Anybody in this room?
35:34There is a question down there. Can we
35:37get a mic?
35:39Hi.
35:40>> Oh, sorry. Over there.
35:42>> Sorry.
35:43>> Shoot.
35:44>> My name is Eric. Uh you talked about
35:46this geoeconomic fragmentation. Could
35:49you elaborate a bit on uh how we can see
35:53a future where more pension fund will
35:56invest in innovation in Europe compared
35:58to investing in the US. Thank you.
36:01>> Good question and also something we
36:03think very think a lot about. I can say
36:06that we actually on Thursday had an um a
36:09sort on risk capital which the central
36:12bank was um was was chairing. So how do
36:16we create that? I it's a little bit of a
36:19chicken and eggs, right? So I I do think
36:22that yes, we should work on the savings
36:24and investment union. Yes, we should try
36:26to make sure that we create that
36:28environment where there's more money
36:30channel into venture capital and so
36:32forth. But it's also important that we
36:34create growth in Europe and that may
36:37mean that there's things we should
36:39adjust in terms of the single market and
36:41so forth. So I think it's a mixture of
36:43it. Um I basically what I'm saying is
36:46that I think there's a lot of things
36:47which has to fall into place to see it.
36:50Um I I I think you can say investors
36:53will still need to basically invest in
36:55what they think created the highest
36:57return and there's a good reasons why
36:58they invested so much in the US because
37:00the return has has been higher. So I
37:03think it's a it's a combination of
37:04trying to create the framework for being
37:07able to uh that that is opportunistic
37:10for investors to invest in Europe and
37:12then of course make sure that we
37:13continue to work on the single market in
37:15Europe both in terms of goods and
37:16services which will hopefully lead to
37:19higher growth in Europe.
37:21At least what I can say is that I think
37:22there's momentum in terms of talking
37:25about these things and something going
37:26on on this front which makes me hopeful.
37:31I think we had another question down
37:32here.
37:34>> Yes. I'm interested in hearing about why
37:37you left out the demographic development
37:39in the world. Um especially when we have
37:41increasing generations
37:44um going from saving up to pensions and
37:47now starting to use that money instead.
37:51Wouldn't this lead to overall an
37:53inflationary environment where there's
37:56less money in the world basically?
37:59Good questions and I could also have
38:01taken up the demographics because you're
38:02completely right. It is a very important
38:04team. So some is saying exactly your
38:07point that eventually we are all getting
38:10old and then we will consume and then
38:13you don't have that you can say
38:16excessive savings as we have now. But we
38:20are not we are not seeing it right. And
38:24you still have very very large countries
38:26which are still in this transition phase
38:28where they are getting older. So you're
38:32right that theoretically one could think
38:33if we all were old then we will start to
38:36spend but I would say as we progress and
38:39we have a lot of countries also even
38:40emerging markets large countries I mean
38:42of course the obvious example is China
38:44who are getting who have a high life
38:46expectancy but are in this transition
38:48phase. So I would say the likes of
38:50China, the likes of Europe, the likes of
38:53the US are still in the transition phase
38:54where we are very far from being Japan
38:57where they already are. But but but it's
39:00a balance. So I agree some of that could
39:02happen. But I think it is still I would
39:04still see demographic development in the
39:06US in in the world supporting savings in
39:09in the world. Net net.
39:14>> Thank you. Any more questions from
39:15anybody? Now you have the opportunity to
39:18ask a real expert.
39:24>> No. Can I ask you
39:26>> of course
39:27>> a question? So you speak about you know
39:29all these blows. Do you have any idea
39:32about what is the next blow to expect?
39:37>> Anything you discuss at the central
39:39bank?
39:44>> That's a good question. Yeah, that's a
39:46very good question.
39:48>> Thank you.
39:50>> No, I I think I think I
39:55>> as you can see he didn't know about the
39:57question.
39:57>> No, he didn't. Exactly. We had not
39:59coordinated. That's how it should be.
40:03>> No, I think I I I think what we focus on
40:06is more you can say as a central banker,
40:08I used to be in the private sector and
40:10there it was. I'm not saying at least
40:12where I was in markets and so forth. It
40:14was a lot about trying to predict your
40:15future. I think I'm less in that game
40:18now. It's more about creating resilience
40:21and that's the reason I I don't really
40:22come up with a very good answer to your
40:24question and that we are focusing on. So
40:27how can we be build resilience from
40:30where we are present in the central
40:32bank? we are focusing on on the economy,
40:34the fixed exchange rate of course,
40:36financial stability, payment systems
40:38where we really have the responsibility
40:40in Denmark. So I think we are more
40:42focusing on creating that resilience
40:45>> um so cyber risk and so forth rather
40:48than trying to predict where it's it's
40:50going. We just take as an assumption
40:52that the world is very uncertain and
40:54there will be new shocks hitting us and
40:56Denmark and that's where we're working
40:58from. So I don't have a yeah I don't
41:00have a very clear where I say this could
41:02be the next job but but good question to
41:04think more about it.
41:06>> Can I have there's a question on here?
41:08Yeah.
41:14>> That sound Oh
41:16right there we go. Good morning.
41:19No, my question relates to public uh
41:22expenses or public expend.
41:28So um if in Europe uh public expenses
41:34increase for funding purposes say
41:36military or otherwise or infrastructure
41:38what not be if the
41:42expenditure within GDP is driven by the
41:46government do you think that will put
41:48pressure upwards on inflation?
41:52>> Yeah good question. I mean it it depends
41:54on it will not um I think let me put it
41:58another way. It will not be the the
42:00primary can channel I will be most
42:02worried about. It is more that some
42:04European countries think about of course
42:06some southern European countries have
42:07very high debt levels. So it's more the
42:10the financial contagion potential
42:12financial contagion of that. You're
42:15right that of course if you if you and
42:17it is something we're also watchful of
42:19in Denmark where we are using a lot of
42:20that more money on military and so forth
42:23is that creating capacity pressure um in
42:27a Danish perspective less so because we
42:29import a lot of it you're right in some
42:31European countries where they produce
42:33some of it it could create some
42:35inflation uh that that's right but again
42:38it will not be my primarily worry my
42:40primarily worry is that simply the death
42:42levels are pretty pretty high in the in
42:44in Europe, in some countries, and
42:45therefore they simply don't have much
42:47capacity.
42:51>> I think we'll end it here. Thank you so
42:53much, Thomas. A big round of applause
42:55again. Really, really great inspiration.
42:58Thank you so much.
43:02And it actually also means that it's
43:04time for the first break. I think
43:05there's a lot of uh things to discuss
43:07from the presentation we just saw. So
43:09get out there, network, grab a coffee at
43:11the barista station in the networking
43:14area, visit the innovation booth and
43:17speak to our experient experts, and last
43:19but not least, get your lead the future
43:22avatar. It takes 2 minutes, AI
43:25generated, and it's really, really fun.
43:27And you can bring it home. And I'll see
43:28you back in here 11:00. Thank you so
43:31much.

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