Economic outlook

Euro area productivity growth has been slowing since the turn of the millennium. Economic policy that bolsters stability in the economy is a vital factor for productivity growth.

The economic outlook for the euro area has deteriorated rapidly. The impact of Brexit on Europe as a whole is hard to predict. Another factor overshadowing the global economy is the trade dispute between the USA and China.

The dominant position of the US dollar exposes other countries to changes in the economy and domestic policies of the United States. As the dollar has no realistic competitors, we cannot foresee any near-term change in its status.

The Bank of Finland has calculated alternative scenarios on the effects of risks to the global economy. In these scenarios, global growth weakens more abruptly than currently forecast.

The summary provides a simple introduction to the assessment of developments in the global economy and monetary policy presented in the March edition of the Bank of Finland Bulletin.

The fastest stage of growth in the euro area looks to have passed, but momentum remains strong. Uncertainty is being fuelled by protectionism and Italy’s domestic economic policy.

Protectionist measures may, at worst, significantly dampen global economic growth. This effect could prove all the more substantial if confidence is weakened and investment is held back.

In the euro area, labour market participation among the working-age population has caught up with that of the United States. Yet a decline in the participation of especially young people remains a cause for concern in both regions.