Image: Hermann Wakolbinger
The economic development this year could be better than expected, says Heinrich Schaller, General Director of Raiffeisenlandesbank Oberösterreich, in the OÖ Nachrichten interview. financial education “extreme important” and expandable in Austria.
OÖ Nachrichten: Ukraine war, energy crisis, economic downturn: What does this difficult environment mean for the international stock exchanges?
Heinrich Schaller: There were cuts on all stock exchanges. There are two main reasons for this: What stock markets don’t like at all is uncertainty. And the economic conditions have changed drastically for the worse because of the Ukraine war. Europe will be the region that suffers the most. It depends on the issue of energy: Where does Europe get the raw materials from – and at what prices? At the moment, however, many companies are still doing well. We are positively surprised that we have managed to make ends meet in just under a year since the beginning of the war.
The economic prospects currently appear to be improving somewhat when looking at national and international sentiment indicators. Could 2023 be better than feared?
Yes I think so. Some economists assumed a recession relatively firmly. We were always of the opinion that a very small growth should be the starting point. If you look at corporate sentiment now, it’s a bit more positive. Austria, especially Upper Austria, is an export emperor. If the economy recovers faster in other regions, we will benefit. I hope that happens. I expect slight growth in 2023, even if it could be more difficult in the first few months.
The leading index of the Vienna Stock Exchange, the ATX, lost almost 20 percent last year, compared to a plus of 40 percent the year before. How are things going this year?
The Vienna Stock Exchange developed very well in the first few days of the year. Heavyweights in the ATX have recovered. That’s a positive sign. I am confident that the ATX will go up – not extremely and there will be ups and downs, which is not unusual for a stock market. At the moment when reports should come that the economic prospects are deteriorating significantly again, there could be stronger rumbles to the downside. I believe, however, that this will be recovered well.
How should investors behave in these uncertain times?
If you observe what is happening on the stock market for a long time, you can see that times of crisis are always followed by very good years on the stock market. If you have enough breath and can afford it, investing in stocks at such a time is very positive in the longer term. I think so this time too.
How much further will the European Central Bank (ECB) raise interest rates?
I think it is highly probable, and there are already announcements from ECB Governing Council members, that we will see further rate hikes, albeit not as much as last year. Because otherwise it is not possible to curb inflation significantly. Will this also affect long-term interest rates? I would be more careful there. These have risen much earlier. If it is foreseeable that the central bank will sooner or later lower interest rates again, long-term interest rates will remain static or only increase very slightly. Many are already talking about whether the ECB is exaggerating. In my opinion: not by far. When the economy starts to recover, it will turn rates down again relatively soon. I’m a proponent that it can’t be too soon. The Americans showed us twice how not to do it when they started cutting interest rates far too soon and then inflation went through the roof. Even if that was a long time ago: You have to be careful.
How do the stock markets react to the interest rate policy?
There is an old rule: rising interest rates mean falling prices. However, share prices have already anticipated a lot, so I wouldn’t fear it too much anymore.
The stock market game was created to improve financial and economic education. From your point of view, how is the situation in Austria?
All in all bad – although of course I very much welcome the fact that there are also committed teachers who take up the topic and impart knowledge about it to the students. The purpose of the stock market game is to get young people involved with the subject. If you do that for a while, you understand a lot more what goes on in stock markets, how many risks and opportunities there are. I think it is extremely important that teaching about finance is embedded in the school curriculum. Sooner or later, each of us will find ourselves in a situation where we have to deal with finances, whether it is investments or loans.
The stock market game lasts two months. You should be more willing to take risks in such a short period of time in order to win something. In the real world, however, one should think long-term.
You should always point out that it is very important in which situation you are yourself. With long-term investments, you should not only make sure that you can make a lot of profit in two months, but also invest in fundamentally good companies that also pay dividends.
When did you first come into contact with financial markets and stock exchanges?
As a 16/17 year old in high school. There was economics as an elective. We heard something about that.
And how do you invest your money?
I’m a fan of funds because other people take care of them and I don’t have to spend a lot of time on them myself.
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