“The world is now catching its breath before the second lap of a tough long-distance race”, Swedish bank SEB said.

Governments and central banks seem to be drawing a sigh of relief as world economy is recovering and unemployment is expected to peak earlier than previously forecasted, SEB said Tuesday in its Nordic Outlook.

Despite a long row of positive signs, such as that China is "guaranteeing" the world that its economy will grow at the 9 percent target rate and that the risk of "printing press inflation" is being exaggerated, the world is not back to business as usual.

"The recovery may still derail," Robert Bergqvist, SEB's Chief Economist, said. "We still do not know how self-sustaining economic growth will be, beyond inventory effects and targeted government support. In 2011, growth risks will be on the downside”.

There is great uncertainty about the shape and impact of exit policies, doubt about how changes in financial sector regulations will affect lending by banks and increasing concerns that economic growth won't be suffice to generate new jobs at the desired pace.

SEB expect GDP growth in the 30 OECD countries to be close to their trend levels in 2010-2011 while unemployment in most countries will peak in 6-9 months, earlier and at a lower level than in our September forecast.

Sweden is well-positioned both in the short and long term as strong fundamentals pay off, the bank said. GDP growth will end up above trend at 2.5 per cent next year and at 2.8 per cent in 2011, partly thanks to the government's stimulus measures. Unemployment is expected level off at around 10 per cent next summer.

"The Riksbank's interest rate policy will be influenced by future banking regulations and by additional fiscal stimulus, which we expect regardless of the political colour of the government that takes office after the September 2010 election", the report said.

The first repo rate hike will come in the spring, the bank forecast, and the key rate is expected to be 2 per cent at the end of 2010 and 3 per cent at the end of 2011. The low interest rate environment will thus persist.

The growth of the Norwegian economy accelerated in the third quarter, with gross domestic product expanding by 0.5 percent from output in the second quarter, the country's statistics office said Tuesday.