HELSINKI: The Bank of Finland has upgraded its growth forecast for the national economy for the period between 2017 and 2019.
Finland’s gross domestic product is set to grow by 1.6 per cent year-on-year in 2017, by 1.5 per cent in 2018 and by 1.3 per cent in 2019, according to the updated forecast published on Thursday. In December, the Bank of Finland forecast that the gross domestic product would grow by 1.3 per cent in 2017 and by 1.2 per cent in 2018.
Juha Kilponen, a head of forecasting at the Bank of Finland, says the forecast was upgraded on grounds of three key developments.
The Bank of Finland acknowledges in its analysis that private consumption and investment are likely to remain the primary drivers of economic growth in Finland. The importance of exports for economic growth, however, is expected to increase in the wake of growth in the eurozone and the recovery of the Russia economy.
Finland, it points out, recorded a year-on-year increase of 0.7 per cent in the volume of exported goods and services in 2016. The value of exports, on the other hand, decreased as a result of a drop in export prices, by four per cent to both EU and non-EU countries and by six per cent to Russia.
The growth in the volume of exports is forecast to hit 3.0 per cent in 2017 before regressing to approximately 2.5 per cent in the following years, according to the Bank of Finland.
The Bank of Finland on Thursday also announced that it expects the country’s cost competitiveness to improve in relation to the rest of the eurozone over the three-year forecast period due to a marginal improvement in productivity and only a moderate increase in unit labour costs.
The growth in unit labour costs in the country is expected to come to a halt this year due to the minimal wage increases and reductions in the social security contributions of employers agreed upon in the competitiveness pact. In the eurozone, meanwhile, the increase in the cost of labour is on average expected to pick up.
“However, the deteriorating terms of trade will be an obstacle to improving cost competitiveness,” the Bank of Finland adds.
