THE DRAFT GOVERNMENT PROGRAMME leaked to Iltalehti on Sunday seems to be based on the expectation that economic growth will exceed forecasts, view economists.
“If most of the spending increases are carried out at the beginning of the electoral term and employment fails to increase as desired, the government will find itself in a tough spot midway into the term,” highlighted Olli Kärkkäinen, an economist at Nordea.
“Based on the information available right now, it is the biggest question mark and risk to the government’s stability.”
Kärkkäinen stated on Twitter on Sunday that he is concerned especially about reports that the government has factored in the employment impacts of various transport infrastructure projects that only provide a temporary boost to employment.
Sami Pakarinen, the chief economist at the Confederation of Finnish Industries (EK), on Sunday reminded that gross domestic product growth fell well short of expectations between January and March. The output grew by 0.2 per cent from the previous quarter and 1.2 per cent from the previous year in the first quarter, according to Statistics Finland.
“The growth rate of employment will slow down along with the economy. What is noteworthy is the recent trend of the employment rate: adjusted to seasonal variation, the rate has stood at 72.4 per cent since December. That's for five months straight. The trend has to be reversed. Otherwise the 75 per cent target will slip out of reach,” he tweeted.
Reports from the newly concluded coalition formation talks indicate that the government is intent on increasing the ranks of the employed by 60,000 and raising the employment rate to 75 per cent by 2023. The employment growth has been estimated to cover 1.9 billion euros of the budget deficit.
Pakarinen on Sunday declared that an increase of 60,000 in the number of the employed will not suffice to meet the employment rate target.
“Weaker growth will inevitably be reflected in expectations, making it difficult to break the spiral. A formulaic calculation shows that 60,000 employed people will not be enough for a 75 per cent rate. The need right now is around 74,000. The number of open jobs is 65,000,” he said.
Kärkkäinen, in turn, reminded that some of the measures set forth in the government programme will have a negative impact on employment, thus further raising the need to take action to promote employment.
Aleksi Teivainen – HT
Source: Uusi Suomi