Jan von Gerich, a chief strategist at Nordea, has warned that the current market situation does not bode well for the future of Finns and Finland, despite the fact that the national economy appeared to re-capture its growth momentum last year after an extended period of uncertainty.
“If the markets are right, Finns’ standard of living will decline,” he states.
Von Gerich reminds in a blog post that many analysts have already voiced their concern about the growth rate of one per cent forecast for Finland in 2017. The current long-term market interest rates, however, are not indicative even of modest economic growth but rather of contraction, according to him.
He explains that because nominal interest rates tend to reflect the rate of inflation and economic growth in the long term, longer-term interest rates can be interpreted as direct indications of real economic growth expectations.
“If we presume that the Finnish economy will grow annually by an average of one per cent for the next five years […] and then reflect the average market rates in the eurozone, the Finnish real economy would (with inflation taken into consideration) be roughly five per cent smaller in 2050 than in 2015,” writes von Gerich.
“This is equivalent to the level of 2004. The average economic growth rate for the 45-year period would be zero,” he adds.
Von Gerich warns that a prolonged period of sluggish or negative economic growth would be fateful for a welfare state such as Finland. The country, he reminds, is already running up billions in debt in order to preserve the welfare state.
“As the population ages, the Nordic welfare state cannot be preserved without growth,” he says. “Luckily, the markets are not always right, and there are several ways to influence the growth prospects. The economic growth, however, will not occur automatically.”
Aleksi Teivainen – HT
Photo: Teemu Salonen – Lehtikuva
Source: Uusi Suomi