Confidence in world economy and growth in Finland increasing
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Prospects for the world economy, and for continued economic growth in Finland is on the increase, according to a number of Finnish observers.
Finland’s Central Chamber of Commerce, and Nordea Bank both gave assessments on Thursday saying that world economic prospects have improved. The Confederation of Finnish Industries (EK) reported that confidence had increased in the service and industrial sectors in April.
Individual consumers also appear to be optimistic about their own finances. According to Statistics Finland, consumers' confidence in their personal economic status was above average in April. For instance, more people are hoping to buy a home, and more than one in ten households actually have plans to buy a new dwelling within the year.
Finnish economists at the Nordic financial group Nordea said that the world economy grew faster than expected in the early part of the year. Nordea raised its forecast for overall production for this year by one tenth of a percentage point to 4.3 percent.
Nordea estimates that Finland’s GDP will grow by 3.9 percent this year, and increase in the next two years by 2.8 and 3.2 percent respectively.
Nordea sees a risk of increased inflation. For instance, bottlenecks in oil production could bring new price pressures.
Nordea economist Kari Heiskanen believes that the European Central Bank will raise its interest rate by 0.25 percentage points or more in June, September, and December.
According to Heiskanen, the rising price of oil has not yet been reflected in consumer prices. However, if wages start rising, there could be a longer-term rise in inflation.
The ECB’s interest rate is now at 2.5 percent, with 3.5-4 percent considered to be the likely ceiling.
Nordea’s head economist Leena Mörttinen expects consumer demand in the United States to ease as summer approaches, once the Federal Reserve’s interest rate hike starts to be felt. Growth should decrease, especially in 2007, but Mörttinen expects a new surge in 2008 when the Fed lowers interest rates again.
The Central Chamber of Commerce sees better prospects for the United States economy after last year’s dip.
The chamber also sees improvements for the euro zone. Germany’s Ifo index, which reflects cyclical expectations, is at its highest since 1991.
In other large euro countries, corporate expectations have been fairly high in recent months.
Last year, growth rates in the EU were highest in the Baltic countries, exceeding 10 percent.
Finland appears to be in the mid-range in global growth, and clearly among the top countries in the EU and the euro zone, where inflation-adjusted real interest rates are close to zero.
Helsingin Sanomat
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| 28.4.2006 - TODAY |
 Confidence in world economy and growth in Finland increasing |
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