HELSINKI: Finland’s economic growth consequently rests on a solid foundation, according to the Ministry of Finance.
The Ministry of Finance points out in a press release that although the growth in national output is expected to decelerate to 1.6 per cent in 2018 and to 1.5 per cent in 2019, the growth rate is expected to outpace the long-term growth potential of the country in the coming years.
Private consumption, which has been the mainstay of the economic recovery, is expected to increase further as the employment situation continues to improve, while the focus of private investment is expected to shift from construction to productive manufacturing, according to the economic forecast.
Finland’s growth, however, is no longer solely reliant on private consumption as exports are emerging as another driver of growth due to rising global demand and the improved cost-competitiveness of domestic businesses.
“After years of negative contribution, foreign trade will begin boosting GDP growth,” predicts the Ministry of Finance.
The outlook for the next two years is marred slightly by rising inflation, which is expected to gnaw away at the purchasing power of consumers and, as a result, slow down the growth in private consumption. The growth in private investment is similarly projected to abate due to the levelling off of construction investments.
“Export growth will keep pace with growth in export markets,” the forecast indicates.
The Ministry of Finance also reminds that the upswing alone will not rectify the structural problems of the Finnish economy.
“While the favourable cycle will increase public finance revenues and reduce outlays on unemployment, the improvement in public finances will be hindered by the ageing population,” it states. “The general government deficit will therefore fall only sluggishly over the next few years.”
Long-term growth prospects, it says, remain muted as public revenues are unlikely to suffice to cover public spending in the long term. The effects of the latest, prolonged recession have also reduced the latitude for measures to respond to the next economic downturn.
“The economy is growing and demand is strong. This would be a good time to restructure the economy and strengthen conditions for future growth,” argues Mikko Spolander, the director general of the economics department at the Ministry of Finance.
