Economic Survey, Autumn 2016

The Finnish economy is predicted to post year-on-year growth of 1.1% in 2016. Over the next two years growth will hover around 1%, and cumulative growth for the whole outlook period will reach no more than some 3%.

Despite the slight rebound, the outlook for Finland’s immediate future is one of continued economic weakness. The 2018 forecast is that GDP will still be some 3% lower than in 2008, and that industrial output will be around one-fifth lower than 10 years ago. The performance of exports will remain weaker than global trade, and therefore Finland will continue to lose market shares in world trade.

In the next few years ahead private consumption and investment will be the main drivers of economic activity. In the medium term potential output growth, which reflects the level of output possible given the resources on hand, will be less than 1%.

The growth outlook for the global economy and trade has deteriorated recently. World trade growth will reach just 2% this year, one percentage point slower than global trade growth.

The UK’s exit from the EU is primarily a negative shock for the British economy itself. UK economic growth will slow appreciably in the immediate future.

In Finland, public finances will remain in deficit until the end of the decade. Successive governments have undertaken substantial fiscal adjustment efforts, but nonetheless failed to significantly reduce the deficit. Slow economic growth is not generating enough tax revenue to finance public expenditure.