Nordea has upgraded its growth forecast for Finland in 2017 from 1.3 to 3.0 per cent due to an up-tick in the world economy and the re-emergence of exports as a contributor to growth alongside domestic demand.
“The first quarter of this year was simply brilliant,” summarises Aki Kangasharju, the chief economist at the financial group.
Finnish exports, he points out, have recently increased at a clip equivalent to that preceding the financial crisis, while the world economy is expected to continue its growth at least until the end of the decade.
Pasi Sorjonen, an economist at Nordea, reveals that the upgraded forecast is somewhat conservative due to the apparent lack of explanation for some of the developments witnessed earlier this year, especially the rapid increase in the consumption of services.
Nordea on Monday estimated that the sustained growth in private consumption is surprising in light of the only moderate improvements in the purchasing power of wage earners. The up-tick in consumption, it said, has been driven mainly by record-high consumer confidence, a decline in household savings and improvements in the employment situation.
The national employment rate could rise to 71 per cent by the end of the current electoral term, according to the financial group.
Nordea revealed that it expects the increase in investments to continue and voiced its delight with the fact that the decrease in research and development spending is finally coming to an end.
Kangasharju, however, also calls attention to the necessity of ensuring that upcoming wage increases remain well below the expected rate of increases – of roughly two per cent – in Sweden and Germany. “Otherwise, our competitiveness will improve at too slow a rate,” he warned. “One year of rapid economic growth is not enough to fill the hole dug over the past decade.”
Finland is also unlikely to be able to sustain the current rate of economic growth in the years to come, according to Kangasharju.
Nordea, he said, expects the growth rate to slow down to roughly two per cent in 2018 and further to roughly one per cent in 2019. The only way to prevent the slowdown is to continue carrying out key labour market and other structural reforms.
“We can ill-afford a coalition crisis or delays in the implementation of reforms,” stated Kangasharju.
Aleksi Teivainen – HT
Photo: Roni Rekomaa – Lehtikuva