Economic Survey, Spring 2019

In 2019, economic growth in Finland will slow down substantially after an upturn and the annual growth rate will be less than 1.5% in the coming years. In the medium term, between 2022 and 2023, the rate of growth will fall below one per cent.

There will be further consolidation in general government finances and they will be in balance by the turn of the decade. However, of the general government sectors, central and local government will still post a deficit. General government finances will start weakening again in the early 2020s as the adjustment measures are coming to an end and economic growth will slow down.

Finland’s GDP is expected to grow by 1.7% in 2019. Growth will be sustained by domestic demand. Private consumption will continue to grow robustly. A higher employment rate and accelerating growth in earnings will sustain the growth of disposable income. Private investments will grow only slowly. There will be a particularly sharp fall in housing construction. World trade will grow more slowly in the outlook period, which will also slow down the growth of Finnish exports.

In 2020, economic growth will slow down to 1.4%. Private consumption will be supported by rising earnings. The value of both exports and imports will increase in the outlook period, a result of growth in volumes and higher prices. In 2021, GDP growth will slow down to 1.3%.

With a slowdown in economic growth and a rise in nominal wages, there will be a gradual weakening in the demand for labour force in 2020 and 2021. A situation where unemployment is falling to the levels experienced during the cyclical peak before the financial crisis will tighten the labour market, which in turn will create more pressures for wage increases and create labour bottlenecks in the Finnish economy.

As a whole, inflationary pressures are expected to grow only slowly in the later years of the outlook period. The rise in earnings is expected to gradually have a broader impact on prices and consumer demand will grow steadily. Raw material prices will increase only moderately, however.