World Economy

Finland Expected to Continue Strong Growth in 2018

Finland Expected to Continue Strong Growth in 2018Finland Expected to Continue Strong Growth in 2018

Finland is poised to continue its strong economic growth also next year, estimates Pellervo Economic Research, or PTT.

PTT on Tuesday upgraded its growth forecast for the country, predicting that improved cost competitiveness and the global economic upturn will spur the national economy to expand by 3% in 2017 and by 2.6% in 2018, Finnish News Agency reported.

The benign economic conditions, it highlights, have brought about an increase in exports, consumption and investment. Employment, in turn, has yet to grow on pace with productivity, but also it is about to pick up in the near future with 20,000 people joining the ranks of the employed in 2017 and an additional 35,000 in 2018, according to PTT.

Finland, however, must step up its investments in research and product development if it wants to maintain its robust growth rate in the long term, reminds Jussi Huovari, the head of forecasting at PTT. “We are about to fall behind others in terms of research investments and the development of educational attainment. Finland began its recovery with measures that will suffice for a while. Future development will hinge on how well it can increase and utilize expertise,” he says.

PTT also estimates that although the strong growth and public expenditure cuts have allowed the country to reduce its budget deficit to the extent that its medium-term objective could be attainable as early as next year, it would be premature to step up public spending or sanction notable wage increases.

“Not before a higher employment rate and improved productivity have pushed the economy onto a higher growth path,” says Huovari. “The public economy continues to have a deficit, and the higher growth rate should for the time being be considered a temporary development. This is not an opportunity to increase public spending. We should also remain patient when it comes to wage increases until unemployment has decreased,” he explains.

Meanwhile, the Research Institute of the Finnish Economy ETLA predicted 3% growth this year. ETLA also said that investment will continue to increase in Finland by 6.6%, largely due to several projects that are substantial in size. It also forecasts that unemployment will fall to 8.5% in 2017, decreasing by 0.3-0.4 percentage points a year until it reaches a rate of 7.2% in 2021.

ETLA also said that the ratio of public debt to GDP will start to decline in 2018, but adds that “keeping a tight rein on public sector spending and revenues will continue to be a prerequisite for favorable growth”.

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