Economic growth | FIT Helsinki 2017 1
The economic growth of Finland 2017
The economy of Finland has been growing at a modest pace since 2012 and at times it has been close to zero. However, the recovering has begun as the year 2016 marked a growth of 1% compared to previous year and according to forecasts, the pace will increase in 2017 and 2018. In recent years, Finland has been one of the slowest growing economies in EU and the government has been trying to fix the situation for a while.
According to the analysis by the Bank of Finland, the country has overcome the recession and the economy is now growing at a healthy rate. The expected growth in 2017 and 2018 is around 1.2 to 1.3% per year and most of this accounts for domestic demand, especially private consumption and investments – latter ones especially in construction sector. In order to increase the competitiveness, the government signed the Competitiveness Pact, which slows down the growth of average earnings and unit labour costs in 2017 by freezing the wages. It also transfers part of the liability for social security contributions from employers to employees, and there will additionally be an unpaid extension of 24 hours to annual working time for members of certain labour unions.
On the other hand, this pact is expected to speed up the growth of investments, exports and eventually GDP. Unfortunately, the current state of world economy has slowed down the exports. The exports from Finland have already started to increase, eventually supporting the growth of GDP.
Meanwhile Aktia Bank says that the growth of Finland’s economy is unfortunately low even though real economy seems promising. The bank believes structural changes and competitiveness are needed in order to increase flexibility and to allow faster growth. The bank also predicts that the global economy will grow by 3.5% in 2017.
OP Bank believes that the number of investments and exports will get better, thanks to the companies’
focus on increasing capacity, competitiveness and overall rising export market. OP expects the GDP to grow by 1.8% this year and by 2% in 2018.
Nordea Bank also believes that Finland needs its economy to grow faster if it wants to remain competitive. According to the bank, both consumption and construction investments are starting to lose their edge and stop aiding the growth as both investments stop growing and private consumption dwindles. They think that the Competitiveness Pact is not able to increase competitiveness enough to cover for lack of exports from Finland. Overall Nordea views the growth much more critically than other banks and believes the growth is temporary, saying there is no basis for long term growth.
All of the banks list construction and private consumption as reasons for growth. However, they believe this to be largely due to the cyclical upswing, rather than real, long lasting growth. The banks do not believe that the growth is sufficient enough at the moment. They also see the low competitiveness of exports and low foreign demand as a problem for the economy and growth. Also restructuring the current models and increasing flexibility job markets has been seen as a vital goal.
In summary, the banks in Finland believe that while the economy is growing by 1% at the moment, but the pace will exceed the EU average. They also believe this is not enough to sustain the growth and the government has to work hard to increase the competitiveness of the country. Exports will be vital for the economy and their number has to be increased through various different methods, such deregulating and restructuring the current systems.
