OP-Pohjola's economists: Minor growth and fragile recovery
(Thomson Reuters ONE) -
The first half saw a slight recovery in the world economy although the growth
remained weak and uneven. According to economic surveys, the world economy is
gradually picking up speed. OP-Pohjola's economists predict that the global
economy will see sluggish growth and the growth rate will remain below the long-
term average next year too.
- However, the global economic landscape will look slightly different. Economic
growth will pick up, driven mainly by industrialised countries. Emerging
economies will continue to grow at somewhat their current pace, says Reijo
Heiskanen, Chief Economist.
The euro-area economy showed a slight recovery in the spring and, according to
OP-Pohjola's economists, should grow at a rate of one per cent next year. This
projection has not changed from the year start. German is forecast to remain the
euro zone's growth engine but the problem countries should also begin their slow
recovery. The inflation rate will remain below the ECB's target.
The ECB has announced that it will keep its key rates low in the euro area for
an extended period. LTRO repayments will gradually drain liquidity, which tends
to raise Euribor rates.
- If the ECB wants to prevent a minor rise in Euribor rates during the next 18
months, it will have to cut its key interest rate or provide additional
liquidity. We expect the ECB to keep its key rate unchanged and, if necessary,
inject liquidity, says Heiskanen.
Economists expect that economic risks will continue to remain much higher than
usual but the risk outlook has gradually changed. The risk of panic driven by
market disruptions in the euro area has decreased substantially but the worst of
the debt crisis is anything but over. Uncertainty may rear its ugly head again
for several reasons. Next year, the US monetary policy will remain a major
concern. An economic slowdown has begun to reveal the vulnerability of a number
of emerging economies. Moreover, the situation in the Middle East will remain
worrisome.
Finland has potential for a well-balanced recovery
The Finnish economy returned to a slow-growth path during the first half.
- We expect that the growth will remain slow towards the end of 2013 and in
2014. Because of the negative carry-over effect, GDP will not increase on
average this year but is anticipated to grow at a rate of 1.7% next year. Our
economic growth forecast for 2014 is the same as in early 2013, says Heiskanen.
According to Heiskanen, the forecast is based on highly moderate pay settlements
that will support Finland's export recovery. A slower rise in wages will also
reduce inflationary pressures and consumer prices are expected to increase by
1.3% next year and by 1.6% during the current year. Due to low inflation, real
wages will not virtually decrease next year.
The gradual recovery of the Finnish economy will come from exports. Consumer
spending and capital expenditure will show sluggish growth compared with prior
years. The growth will also increasingly be based on higher productivity and
employment. The unemployment rate is expected to remain on average at this
year's level, 8.2%.
The Finnish current account has improved rapidly during the current year, as a
result of a reduction in imports and an improvement in terms of trade. The
current account is anticipated to improve further in the wake of a gradual
recovery in export markets. Moreover, a corporate tax reform will contribute
favourably to the current account. Finland's current account is actually
expected to show a slight surplus next year.
The Finnish fiscal deficit should improve slightly next year but the public
debt/GDP ratio is expected to rise close to the ceiling of 60% imposed by the
EU. The debt is projected to grow relatively fast because the combined deficit
run by the government and municipalities will remain almost 4% relative to GDP.
- The surplus of the authorised pension providers in Finland will keep the
public deficit within the limits of the Maastricht criteria but will not slow
down growth in government debt because only a small proportion of pension assets
have been invested in Finnish government bonds. If positive surprises do not
come from the Finnish economy, additional spending cuts will be required in
2015 to meet the criteria set for the public debt/GDP ratio, points out
Heiskanen.
For more information, please contact:
Reijo Heiskanen, Chief Economist, tel. +358 10 252 8354
Reijo Heiskanen, Chief Economist, and Maarit Lindström, Vice President and
Economist, will discuss economic prospects in OP-Pohjola Nyt (OP-Pohjola Now)
broadcast on 26 August 2013, starting at approximately 2 pm at op.fi > OP-
Pohjola-ryhmä > Uutishuone
OP-Pohjola Group
OP-Pohjola Group is Finland's leading financial services group providing a
unique range of banking, investment and insurance services. The Group's mission
is to promote the sustainable prosperity, well-being and security of its owner-
members, customers and operating regions through its local presence. Its
objective is to offer the best and most versatile package of loyal customer
benefits on the market. OP-Pohjola Group consists of some 200 member cooperative
banks and the Group's central institution, OP-Pohjola Group Central Cooperative,
with its subsidiaries and closely-related companies, the largest of which is the
listed company Pohjola Bank plc.
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originality of the information contained therein.
Source: Pohjola Pankki Oyj via Thomson Reuters ONE
[HUG#1724644]
Unternehmensinformation / Kurzprofil:
Datum: 26.08.2013 - 09:00 Uhr
Sprache: Deutsch
News-ID 290735
Anzahl Zeichen: 6531
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Kategorie:
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