Building a Fire with Wet Wood
(Thomson Reuters ONE) -
Press release, 27 August 2012
Global economic growth slowed down last spring after a relatively favourable
development early in the year, and we could not witness any clear signs of a
turn for the better during the summer. Yet, stock and commodity prices increased
and some leading indicators began to show improvements. After the latter half of
the year, the world economy is expected to pick up. Next year, economic growth
is expected to be slightly faster on average.
We anticipate the world economy to grow this year at a rate of 3.3% and next
year at a rate of 3.7%, which is a slightly slower rate than that predicted
early in the year and that based on the current consensus forecasts.
The US economy is primarily expected to continue its steady but fairly slow
growth. The Chinese economy is projected to improve somewhat in the wake of
revival measures. The euro area is in a slight recession but should see slow
growth next year, propped up by improved export demand, a weaker euro and easy
monetary policy. The recession is expected to continue in some euro-area
countries next year too, although it should be milder.
Still risks out there
A number of risks are casting a shadow over the outlook. The presidential
election and the economic policy in the USA and the change of power in China may
temporarily make markets nervous. The euro-zone debt crisis still presents the
greatest risk to the economic outlook.
- We expect uncertainties to continue to persist due to the euro-zone debt
crisis. More new stimulus measures will be needed in future, and the resources
of the ECB and the ECM will have to be used. Our view is that despite the
uncertainty the crisis should not get any worse next year, states Reijo
Heiskanen, Chief Economist.
The ECB is also expected to use new tools to invigorate the financial market. In
practice, this means extraordinary measures through liquidity-providing
operations. These new measures should improve market confidence and may help
calm government bond markets. We estimate that these extraordinary measures
through liquidity-providing operations will at least temporarily contribute to
economic development.
Short-term market interest rates are already so low that even if the ECB cut its
key rate to 0.5% and its deposit rate to negative, this will hardly have any
major effect on short-term rates.
Slow growth in Finland
The Finnish economy is growing slowly this year, with the growth rate and mood
varying clearly by quarter. After a surprisingly favourable development during
the first few months of the year, GDP growth turned negative in the summer. The
rest of the year is expected to remain sluggish although the economy is
anticipated to recover. Next year is expected to see a slight improvement in
economic growth although the growth rate will remain slow.
OP-Pohjola Group's economists predict that Finnish GDP will grow by 0.7% this
year and by 1.4% next year, as against the corresponding figures of 1.0% and
2.0% predicted early in the year. Major reasons for this cut forecast include
weaker export demand, reduced capacity of export companies and the economic
policy that weakens consumer spending power.
In 2013, economic growth is anticipated to be more led by exports than in 2012.
Consumer spending is expected to remain subdued because of the slow growth in
real spending power. Housing markets is expected to pick up slightly, boosted by
low interest rates, whereas capital spending is anticipated to remain flat.
Price increases are expected to slow down only slightly next year because of an
increase in the VAT rate. Inflation will also be fuelled by rising food prices
as a result of higher world-market prices. Unemployment is expected to remain on
average at somewhat the same level as during the current year.
Fiscal tightening with an unsound focus
The fiscal deficit is expected to remain almost the same as this year. Fiscal
tightening has an unsound focus in view of economic growth because it focuses on
tax hikes. The postponement of spending cuts raises doubts about whether the
government will, despite promises, continue to fix the fiscal deficit through
tax increases and whether the environment for economic growth will be improved
only ostensibly.
- We do not expect the big economic picture to see any major changes by summer
2013. Growth will remain sluggish and the sentiment will be nervous sometimes as
the euro-area debt crisis is exasperating. However, late next year there will
already be potential for improved economic expectations. But before that, our
faith in a gradual economic improvement will certainly be tested more than once,
states Reijo Heiskanen.
For more information, please contact: Reijo Heiskanen, Chief Economist, tel.
+358 (0)10 252 8354
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Pohjola Pankki Oyj via Thomson Reuters ONE
[HUG#1636305]
Unternehmensinformation / Kurzprofil:
Datum: 27.08.2012 - 09:00 Uhr
Sprache: Deutsch
News-ID 177782
Anzahl Zeichen: 5853
contact information:
Town:
POHJOLA
Kategorie:
Business News
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Die Pressemitteilung mit dem Titel:
"Building a Fire with Wet Wood"
steht unter der journalistisch-redaktionellen Verantwortung von
Pohjola Pankki Oyj (Nachricht senden)
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