2005-06-22
Accordance to Tapiola Bank’s newly published review of business conditions, the economic outlook for Finland is weaker due to slackened global economy and the industrial actions in the paper industry. The outlook is still moderate on the scale of the euro-zone.
- This year the Finnish economy grows on average 2.5 percent, the inflation will remain under 2.0 percent and the unemployment rate will decrease to 8.3 percent, estimates Tapiola Group Senior Economist Jari Järvinen.
For employees and entrepreneurs the slackened growth means increased uncertainty, which may decrease consumption and postpone investment decisions. For debtors and savers, the slackened growth means low interest rates.
- ECB continues with an easy monetary policy. At present, there are no grounds either to raise or lower the interest rates. However, debtors should prepare for a slight increase in interest rates in the long term, states Järvinen
The positive tendency on the housing market continues. Especially the number of first home buyers is big on the market. The most powerful raise in the housing prices seems to be over.
- An actual price bubble cannot be seen on the Finnish housing market, and sudden changes on the price level are not in sight.
After the economic peak last year, the global economy is turning towards an economic recession. The dollar continues to weaken in relation to the euro, because in the long run, the adjustment of the deficit in the balance of current accounts requires a weaker dollar. FED continues to increase the interest rates gradually towards a “neutral” level. At the end of the year, the key interest rate of FED will be 3.5 percent.
- The US economy cannot take high interest rates. The possibility for a new economic slump in the US is approximately 20 percent, forecasts Järvinen.
The complete review is published online in Finnish at www.tapiola.fi/suhdannekatsaus. Tapiola publishes a review of business conditions four times a year, the next one on September 28th.