22 Nov. 2016 - Economic forecast by OP economists: The Finnish economy continues its recovery after all

OP's economists revise their growth forecast upward. Growth is expected to speed up next year helped by pickup in exports.

In their economic forecast, OP's economists have revised their forecasts based on the most recent economic development. The Finnish economy has gradually recovered over the course of the year. According to preliminary information, GDP increased by 1.4% in the third quarter. Confidence indicators have also improved, which suggests that the pace should remain brisker in the near future.

OP's economists have slightly revised up their forecast for GDP growth for 2016 from 1.1% to 1.2% and that for 2017 from 1.2% to 1.4%.

- Worries felt in the summer about export market prospects have now somewhat eased and the mood in the domestic market has been better than expected, explains OP's Chief Economist Reijo Heiskanen about the underlying reason for the revised forecast.

This year economic growth is based on domestic demand but the economists assess that exports too should gradually pick up next year.

Employment too has developed more favourably than predicted earlier. Next year will see a further improvement in employment, and the unemployment rate should decrease to 8.5% as against 8.7% forecast previously.

The biggest economic risks in the short term are associated with export markets. The Finnish economic policy has made progress and the policy measures should already buttress the economy in the second half of 2017. However, there are still unfinished measures and there is still way to go to reach the set goals.

World economy shows some signs of recovery

The world economic outlook has somewhat improved recently. Economic surveys indicate a faster pace in manufacturing industry and world trade in particular.

On the whole, the world economy should continue to grow slowly next year, albeit slightly faster than this year. The outlook is a little bit better than forecast in the summer.

- Brexit added to economic woes in the summer and now the US presidential election has raised questions. The uncertainty caused by Brexit remained transient and the economic policy programme of the new president is a stimulating one by nature in the short run. For both countries, the next year outlook is more favourable than we predicted last summer. But in the long run, however, worries about Brexit or the economic policy pursued by the Trump administration are legitimate, states Heiskanen.

The euro-area economy should continue to grow at a fair pace. The inflation rate is expected to hover 1.5% as the falling crude oil prices should no longer obstruct a rise in the price level. The European Central Bank (ECB) will specify its policy in December, and we expect it to continue its asset purchase programme after March too but to keep its main refinancing rate unchanged for a long time. It is possible, however, that the Bank will reduce the programme size.

The biggest risks associated with the world economy are political. Next year will see a number of elections that extend the period of political uncertainty. However, deflationary woes should ease, and the debate in the euro area too is expected to increasingly turn to normalising the current highly quantitative easing policy.

Further information and requests for interviews: Chief Economist Reijo Heiskanen, +358 (0)50 5686 623 or OP Communications, +358 (0)50 523 9904

OP Financial Group is Finland's largest financial services group whose mission is to create sustainable prosperity, security and wellbeing for its owner-customers and in its operating region by means of its strong capital base and efficiency. OP Financial Group consists of about 180 member cooperative banks, its central cooperative OP Cooperative, and the latter's subsidiaries and affiliates. The Group has a staff of 12,000 and 1.7 million owner-customers and 4.3 million customers. www.op.fi