CONCERNS about the trend of the global economy are casting a shadow over the economic outlook for Finland.
The Bank of Finland on Tuesday announced it has slashed its growth forecast for the national economy from 1.9 to 1.6 per cent for 2019 and from 1.7 to 1.5 per cent for 2020, saying the growth will rest largely on domestic consumption and investment.
Private consumption, it said, will be supported by improving employment figures, wage increases and low inflation rates, while uncertainty over the direction of the economy will hold back household consumption to some extent.
Growth in Finland’s export markets will slow, but export growth will be sustained by reasonably rapid eurozone growth, relaxed financing conditions and improved competitiveness of Finnish exporters.
The Bank of Finland reminded that the Finnish economy has underwent broad-based growth in recent years, but, although the growth is expected to continue, the risk of it falling short of forecasts is high. If Europe and Germany, in particular, struggle to emerge from the current downturn, it would curtail both export and economic growth in Finland.
The expected growth is also not robust enough to achieve a fiscal balance by the end of the forecast period, with the general government deficit expected to stand at -0.3 per cent of GDP in 2021.
Employment growth, similarly, has been unusually robust in recent years but is expected to slow down noticeably in the coming years. The employment rate is forecast to climb to slightly over 73 per cent by the end of 2021.
“The slowing of economic growth and decline in the working-age population will mean slower growth in employment,” summarised Meri Obstbaum, the head of forecasting at the Bank of Finland.
“Finding work is also hampered by various types of labour market mismatch such as the weak availability of labour force in some sectors.”
The Finnish government has founded its economic policy and spending increases on the expectation that the employment rate can be raised to 75 per cent by 2023. Meeting the target will require that the ranks of the employed grow by roughly 75,000 and that economic growth outpaces the baseline forecast by roughly one percentage point in 2020–2023, according to the Bank of Finland.
Olli Rehn, the governor of the Bank of Finland, on Tuesday said in a press conference the long-term target for the employment rate should be set closer to the levels elsewhere in the Nordics. The employment rate currently stands between 75 and 78 per cent in Sweden, Norway and Denmark.
“No measure alone will suffice to raise the employment rate enough, but many reforms will be needed,” he stressed, also drawing attention to the upcoming rounds of collective bargaining talks.
“It’s justified that the collective bargaining agreements in export-oriented industries set a framework for the development of costs that shouldn’t be exceeded in other domestic industries under normal circumstances,” added Rehn.
Aleksi Teivainen – HT
Source: Uusi Suomi