HELSINKI: The Bank of Finland on Thursday predicted a higher growth in Finnish economy, but said the overall growth in economy would still remain below the eurozone average. The Bank of Finland raised its prediction of gross domestic product (GDP) growth for this year to 1.1 per cent, from the 0.7 per cent forecast made in December. According to further prognosis, the Finnish economy would grow by 1.1 per cent in 2017 and 1 per cent in 2018. In 2015, the Finnish economy grew by 0.5 per cent.
The positive prediction by the bank was made largely based on domestic demand. Private spending has developed better than expected. This year growth of exports is predicted to remain under one per cent, but would reach 2.5 per cent in 2017 and 2018. Governor of the Bank of Finland Erkki Liikanen told the national broadcaster Yle that the recent agreement on the labour market meant a real decline in the unit costs of export industries. Unemployment is declining slowly. The bank predicted 9 per cent of the workforce would be without jobs at the end of 2018. In April, the rate of unemployment was 9.8 per cent.
Liikanen underlined that even the change of trend in employment as such was important. He pointed out that among the developed countries Finland has suffered the largest drop in exports and industrial production since the economic crisis in 2008. The growth of public debt would continue. The Bank of Finland predicted that in 2018 public debt would reach 70 per cent of the GDP. Last year the ratio was 63 per cent. Investment will pick up, particularly in construction, but also in other sectors of output. In contrast, inflation will remain slow in Finland for an extended period of time.
Growth of exports in the period 2016-2018 will be slower than foreseen earlier and exports will improve only moderately. In recent years, exports to Russia, in particular, have contracted strongly. By contrast, exports to the euro area have grown substantially since 2013. The low level of interest rates and subdued developments in prices will support household purchasing power and economic growth as well via consumption. However, based on this development, the household debt will continue to grow. According to the forecast, employment developments in Finland can be expected to be slightly better relative to the growth rate of the economy than experienced in the past.
