The Finnish economy will continue its stout growth at least until the end of next year, predicts Pellervo Economic Research (PTT).
PTT on Tuesday revealed that it expects the national economy to grow by 2.8 per cent in both 2018 and 2019, allowing almost 90,000 unemployed job seekers to join the ranks of the employed. The Finnish economy beat the expectations of most forecasting agencies last year by expanding by 3.0 per cent.
The growth will be driven especially by the upbeat outlook for the world economy and its impact on Finnish exports.
The Helsinki-based, independent economic research centre reminds that the world economy is currently enjoying its first sustained upturn since the most recent financial crisis, an upturn that is expected to continue until next year.
Finnish exports, meanwhile, are forecast to grow at an annual pace of roughly six per cent in 2018–2019, driven particularly by continuing investment activity. PTT points out that investments in equipment and machinery have increased by over ten per cent for two consecutive years, while the competitiveness pact and continuing wage moderation have bolstered the competitiveness of Finland.
PTT believes the biggest shadow looming over the world economy to be the trade war rhetoric of US President Donald Trump.
It reminds that while product-specific import tariffs would have a negative effect primarily on the United States, the escalation of possible counter-measures could thwart the stout economic growth.
“The EU should not raise its own import tariffs. It would be smarter to let the United States have its tantrum alone and continue promoting global trade with other countries,” views Janne Huovari, the head of forecasting at PTT.
The steadfast economic growth has also had a positive impact on employment in Finland. The ranks of the employed grew by 25,000 in 2017, and are expected to grow by more than 50,000 in 2018 and 35,000 in 2019, putting the government within reach of its employment rate target of 72 per cent.
PTT attributes the positive development to both global economic growth and recent policy measures.
It also reminds that the development has yet to have a notable effect on the unemployment rate. This, it gauges, is not an indication that structural unemployment is becoming an obstacle to growth, but rather that the number of job seekers entering the labour market has been so high that it has prevented the unemployment rate from decreasing.
Finland’s unemployment rate is forecast to fall to 8.0 per cent in 2018 and to 7.4 per cent in 2019.
The improving employment situation, combined with wage increased in a number of sectors, will boost the real purchasing power of households by 2.6 per cent – more than ever before in the 2000s. Household consumption is consequently expected to increase by two per cent in both 2018 and 2019.
PTT also urges policy makers to resist the temptation to use the positive developments as an excuse to draft a generous election-year budget.
“Although the current fiscal policy can be regarded as too relaxed in light of the rapid growth, Finland still has some catching up to do. It will be stringent enough to refrain from increasing expenditures and reducing taxes in the election-year budget,” says Huovari.
Aleksi Teivainen – HT
Photo: Jussi Nukari – Lehtikuva