HELSINKI: Finland has clearly emerged from a downturn lasting nearly a decade, the Nordic country’s central bank said Tuesday, boosting its growth forecasts. The Bank of Finland now expects a stronger expansion in 2017-2019 than previously thought, marking an end to the country’s long slump that included a three-year recession. Finnish growth is, however, still not as strong as it could be, it cautioned. “Growth will … remain slow relative to previous cyclical upswings and the rest of the euro area as structural problems in the economy and population ageing dampen recovery,” it said in a statement. Private consumption and investment will be the main drivers of the economy, which is expected to grow by 1.3 percent in 2017 and by 1.2 percent in 2018 and 2019.
The bank’s June forecast had predicted growth of 1.1 percent in 2017 and 1.0 percent in 2018. The Finnish economy has been in a slump since the global financial crisis hit Finland’s export-driven economy hard from 2007 onwards, while the economic woes of its neighbour and major trading partner Russia led to declining exports. In 2015, after three years of recession, the country finally saw a ray of light with fragile growth of 0.5 percent.
Finland’s centre-right government has resorted to harsh austerity measures to put the economy back on track, including a deal with the country’s powerful unions to cut the cost of labour by making Finns work three additional days a year without a pay rise. The bank said it believed private consumption would remain the main driver of growth, while exports should also recover “amid better competitiveness and higher external demand.” The positive developments and savings in public spending would strengthen the general government fiscal position but “growth in pension expenditure will remain rapid,” the bank warned.
