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Fri, 16 May, 2014 12:06:39 AM
Economic-growth forecast may be downgraded: economists
FTimes-STT-Xinhua Report, May 16

The slump in the outlook of the country’s economy exposes the financial system to risks, according to the Bank of Finland.

The financial system is vulnerable to a high level of household debts and high house prices, said Bank of Finland Deputy Governor Pentti Hakkarainen at a press conference in Helsinki on Thursday.

He said the increase in possible risks must be closely monitored.

Housing prices may decline in case a negative economic surprise situation arises, thus undermining household consumptions, said Hakkarainen, adding that an increase in interest rates would also have the same effect.

In essence, this situation poses risks to the real economy, although the stability of banks does not face an immediate threat, he said. The resilience of banks in the country has remained sound.

File picture of Nordea bank chief economist Pasi Sorjonen (Right). Photo Lehtikuva.
According to Hakkarainen, the existing tools to prevent the financial systems from risk should be sufficient. He, however, observe d that “The ability and the right to use them (tools) must be availed in good time.”

The deputy governor said the EU banking union will assume the role of supervision and crisis resolution to the cross-border level. These monitoring and resolution capabilities are to match the financial institutions’ actual areas of operations.  

News Agency Xinhua adds: The forecast of Finnish economic growth may be lowered once again, Finnish economists said on Thursday.

The output of the national economy declined by 2 per cent in March 2014 compared to that in the previous year and by 1 per cent compared to that in the previous month, according to statistical data released by Statistics Finland on Thursday.

The economic contraction in the first quarter of this year could be a reason to lower the forecast, said the Finnish newspaper Kauppalehti quoting Nordea Bank Chief Economist Pasi Sorjonen.

The figures show that the economy is weaker than expected and will cause a downgrade of the previous forecast, while the whole European Union economy seems to recover, said Pasi Kuoppamaki, chief economist at Danske Bank.

He said although international trends are generally mirrored in the Finnish economy quite obviously, this time the economy has not improved since the summer of 2011.

“Merely zero growth requires a significant cheer-up by the end of the year,” said Sorjonen, adding that the Finnish economy may suffer the third consecutive year of negative growth.

In March, Nordea Bank lowered the Finnish economic growth in 2014 from 2.2 per cent to 0.3 per cent and Danske Bank downgraded its forecast of 1.1 per cent to 0.5 per cent

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