Economic outlook

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.

Concerns about a protracted period of low growth soon followed the recovery from the Great Recession. Recent strength in the euro area economy does not exclude the risk of secular stagnation.

Sweden's economy is performing well. However, if it were to deepen, the downward turn in house prices could cut the positive trend in the economy.

Following the steep contraction caused by the financial crisis, there have been substantial differences in economic performance across the different countries in the euro area. Healthy economic structures appear to have facilitated a speedier recovery.

The favourable outlook for the global economy is overshadowed by the threat of protectionism. In the euro area growth has picked up. Some of this acceleration is on a sustainable basis, but long-term growth is likely to remain slower than pre-crisis growth.