OP Bank Group expects 4.5 percent GDP growth this year
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Finnish GDP is set to grow by 4.5 percent this year, said the OP Bank Group. The bank's forecast published on Monday says that the Finnish business cycle is to climax this year; next year growth is expected to slow down to about three percent.
"The cyclical situation is better than normal in all main sectors", said head economist Timo Lindholm.
Economic growth in the early part of this year has been clearly faster than expected, even if the rebound from the labour dispute in the paper industry last year is taken into account.
The bank reports that employment is improving thanks to the positive economic development, and is at about the average for the euro zone.
The unemployment level is expected to dip to near six percent next summer, and over the whole year, the number of jobless is expected to fall below 200,000, Lindholm says. The average unemployment level for next year will be 7.4 percent.
"Industrial growth has been brisk, exceeding even the positive expectations of previous estimates", Lindholm noted. "Outstanding orders and the use of capacity are near the cyclical peak of 2000."
In the summer, nine out of ten companies said that they were operating at full capacity. The shortage of skilled labour has slightly increased.
Things are better than usual in construction and services as well. Consumer expectations are more positive than average, and the money supply and possibilities to save are excellent, even though there is a slight increase in caution.
Lindholm says that the monetary policy of the United States is changing because of slower economic growth. In the euro zone as well, the rise in the interest rate is to be very small.
The capacity for borrowing by those with middle incomes, which has been growing for 20 years, is going down this year and next, as the impact of higher interest rates exceeds the average growth in income.
"Because of higher inflation, the US Federal Reserve will raise its interest rate one more time. The high point of the interest rate cycle will be 5.5 percent, and the first cut in the rate will come in the second half of 2007", Lindholm predicted.
In the previous interest rate cycle, the US rate reached 6.5 percent at its highest.
Helsingin Sanomat
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| 12.9.2006 - TODAY |
 OP Bank Group expects 4.5 percent GDP growth this year |
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