Pohjola Pankki Oyj : Return to slow growth
OP-Pohjola's economists predict that the world economy will grow in 2013 at
about the same rate as in 2012. In 2014, the world economy will increase to an
average rate of growth.
2013 began in most developed countries modestly, but should pick up speed
gradually. Of the major economies, the US will have slow growth in early 2013
as higher taxation is eating away at purchase power. At any rate, the US
economy will grow by about two per cent in 2013, too. The euro area economy
will on the whole begin to recover again this year, but on average euro
economies will not increase. A proper increase is not to be expected until
These forecasts are based on the assumption that the euro area sovereign debt
crisis will remain relatively stable. However, it is likely that uncertainty
will increase occasionally, and the ECB may have to keep its promise on buying
Short-term euribor rates will remain at about their current level both in 2013
and 2014. The European Central Bank's main refinancing rate will remain
between 0.50 and 0.75 per cent. OP-Pohjola's economists estimate that the US
Fed will increase its rates already in late 2014, which will cause long-term
interest rates in the euro area to increase, too. The euro will remain quite
strong well into 2014, but as the Fed will tighten its monetary policy, the
euro will decrease in value.
The first part of 2013 will feature the familiar risks, such as the US fiscal
cliff and the euro area sovereign debt crisis. The markets may test the ECB's
promise on unlimited but conditional purchases of government bonds.
According to OP-Pohjola's economists, 2013 will be a kind of transition year.
The economies of industrialised countries will not recover properly, nor will
they go down either. 2014 will see an improvement, but on the other hand, the
risks will also be higher than in 2013.
OP-Pohjola's Chief Economist Reijo Heiskanen estimates that the acid test for
the euro area will be 2014-15 when the crisis countries will have to live up
to the expectations of making a recovery. This period coincides in the USA
with a shift from an exceptional monetary policy back to what is more normal,
which is also a risky juncture.
Finnish economic growth to slow down by 0.8% in 2013
OP-Pohjola's economists estimate that the Finnish economy will take a turn for
the better already in the early months of 2013 following a small dip. GDP will
increase this year by 0.8% and in 2014 by 1.7%. In the autumn of 2012,
economists made a forecast that Finland's GDP will increase by 1.4% in 2013.
"One cannot really talk of an actual recovery yet, it is more of a case of
returning to a slow growth path. Growth will recover more clearly in 2014, but
it will not be until 2015 that the conditions are right for a proper upswing,"
says Mr Heiskanen.
A gradual increase in economic growth hinges on exports. Private consumption
is increasing slowly, and capital investment will shrink still in 2013. The
increase in real income will be about one per cent both in 2013 and 2014.
The forecast is based on an assumption of a very moderate pay deal. In 2014,
the increase in income will slow down to about one per cent, which is the
lowest figure for five decades apart from 1993. Inflation, too, will slow down
sharply, so the decrease in real income will be small. OP-Pohjola's economists
expect inflation to be 2.2% in 2013 and 1.3% in 2014.
Unemployment will rise steeply in the spring momentarily, but the annual
average of employment in 2013 will remain at 8.1%. Both the current account
deficit and fiscal deficit will fall somewhat.
"Market fluctuations have not disappeared anywhere. The market will be poor
this year and at best moderate in 2014. But this time there is light at the
end of the tunnel, and a proper upswing is expected. But that is still a long
way from now, and the Finnish economy's long-term growth prospects have
reduced markedly as a result of the financial crisis. The Finnish economy is
unlikely to reach previous growth figures in the long term," says Reijo
For more information, please contact: Reijo Heiskanen, Chief Economist, tel.
+358 10252 8354
Chief Economist Reijo Heiskanen and Economist Maarit Lindström will talk about
the financial outlook on the 'OP-Pohjola Group Nyt' webcast on 21 January 2013
at about 2 pm on op.fi > OP-Pohjola-ryhmä > Uutishuone.
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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Source: Pohjola Pankki Oyj via Thomson Reuters ONE
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