Economic Survey, summer 2016
The forecast for Finnish GDP growth in 2016 is 1.4% and for the next two years 1.0% and 1.3%. Global recovery remains sluggish. World purchasing power adjusted GDP growth will reach just 3.1% in 2016 and pick up only marginally in 2017 and 2018. Growth is at its slowest rate since the financial crisis and below the long-term average.
Private consumption growth is robust for the current economic situation. Consumption growth is supported by rising household real disposable income, improving consumer expectations as well as the falling savings rate. Private investment is also set to increase in 2016: construction investment in particular is expected to post strong growth of over 7%. Unemployment growth has come to at least a temporary halt, according to both Statistics Finland’s sample-based Labour Force Survey and employment service statistics compiled by the Ministry of Employment and the Economy. In 2015 the unemployment rate climbed to 9.4%, but in April this year the trend of the unemployment rate fell back to 9.1%.
Output in Finland is finally back on track to growth. Gross value added increased by 0.7% last year, and growth has now been recorded for five consecutive quarters. Economic growth is gathering momentum in an increasing number of sectors, albeit very slowly with the exception of construction. The general government deficit decreased to less than 3% last year. The budget balance will remain in the red, even though the deficit will shrink in response to fiscal adjustment. In 2015 public debt to GDP exceeded the 60% threshold, and the debt ratio will continue to increase throughout the forecast horizon. The recent agreement of a Competitiveness Pact is a significant first step on the road to restoring confidence in domestic economic policy. However, it will take some time for the benefits of the pact to filter through to the real economy.
