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Since the global financial crisis, investment has grown more slowly in the euro area than in the United States or the United Kingdom. There is no lack of savings in the euro area, but there are not enough attractive investment opportunities.

Import tariffs imposed by the United States would weaken growth everywhere and it seems there would be no economic winners. A trade war could even lead to businesses postponing investments and growth in the economy slowing down significantly.

The significance of Finland’s service exports has grown rapidly. Service exports comprised about one third of the total value of exports in 2023. Finland’s service export destinations are dominated by a fairly small number of countries, the most important being the United States.

Climate change and biodiversity loss pose threats to financial stability. The financial sector in Finland seems to have less exposure to emissions-intensive businesses than in many other euro area countries, but the risks surrounding the transition to carbon neutrality can hardly be avoided in Finland either.

Geopolitics can bring about volatility in inflation and in the rest of the economy. However, geopolitical surprises and their consequences are not particularly well understood yet in economics. The impact of such surprises on euro area inflation nevertheless varies case by case.

Employment has grown strongly in the euro area since 2020. This has been attributable to both demand and supply factors. In the near future, population ageing will reduce the supply of labour in the euro area. The impact of population ageing will nevertheless be softened by a rise in the labour force participation rate, work-based immigration and a reduction in structural unemployment.

A considerable proportion of the corporate loan stock in the euro area consists of loans with a fixed – rather than a variable – rate of interest. However, this proportion differs by industry and even more so by country. In Germany and France, the majority of corporate loans are tied to a fixed rate. In Finland, the proportion of fixed rate loans is small.

It is well known that the real natural rate of interest, r*, is an inherently unobservable variable, and therefore reasonable estimates of its level are hard to determine. In our search for such estimates, we first apply a semi-structural model by Holston, Laubach and Williams (2023) and the Federal Reserve Bank of New York’s recent estimate of the euro area natural rate.

Finland’s export growth has fallen behind the growth in world trade. The reasons for this include not only the unfavourable structure of Finnish exports, but also the insufficient ability of Finnish companies to export products that stand out from the competition.

The discontinuation of trade with Russia has not had a major impact on Finland’s economy as a whole. The collapse of exports to Russia has not reduced overall exports in the case of many goods, because exports to other countries have increased.

The capital position of Finland’s banking sector is expected to strengthen in the immediate years ahead, provided that interest rates and the economy develop in line with forecasts. In a very severe economic crisis, the capital position would weaken significantly but would still remain adequate.

The regulatory and supervisory tightening since the global financial crisis has protected banks from new crises. Research findings indicate that the benefits achieved through regulation and macroprudential policy have exceeded the disbenefits.

The anchoring of expectations and the moderation of energy and food inflation are contributing to reducing the rate of inflation. The tight labour market and the rise in wages to compensate for higher prices are nevertheless still keeping inflation above the 2% target.

The revised EU fiscal rules aim to improve primary balances and consequently strengthen the debt sustainability of EU Member States.The sustainability of government debt levels depends on the size of the interest rate-growth differential and primary balances.

The instability seen in crypto-asset markets has had very little effect on the global financial system, but the growing and partially hidden linkages between markets are a cause for concern.

Fluctuations in the current account are caused by energy prices, in particular. An increase in domestic electricity production will not be enough alone to turn the energy account around into surplus. The deep deficit on the services account will not necessarily be improved quickly.

Inflation expectations are of key significance for price trends. Expectations regarding the future rate of inflation will affect price setting by businesses and the wage demands of employees.

With monetary policy normalisation proceeding, the ECB has begun a review of how it will implement monetary policy in the future.

Last December, the ECB announced that it will review how it is to control interest rates in the future. The outcome of the review will also impact the size and composition of the Eurosystem’s balance sheet in the future.

The need to rapidly reduce carbon dioxide emissions will adversely impact the operations of many companies, and may make old operations unprofitable. Loan portfolio risks can be assessed by combining company-specific information on technologies and emissions with corporate loan portfolio data.