Finland Says Growth to decelerate Next Year

The latest survey from the ministry of finance forecasts that the Finnish economy will grow by 2.4% in 2018 which it says means an increase in employment, a decline in the general government deficit and slower growth in the state’s debt burden.

The ministry of finance’s forecast shows that Finland will post a GDP growth figure of 3.1% for the full year 2017, and that the growth rate will then slow to around 2%, Yle reported.

Foreign trade and domestic demand are expected to be the main drivers in the economy over the next few years. Pay is forecast to rise more rapidly in 2018 and 2019.

Employment growth will accelerate to 1% and the earnings level in the coming year is forecast to rise by 2%, assuming that the forthcoming pay settlements are in line with agreements already made.

The ministry of finance survey says that private consumption growth next year will be driven by higher earnings and a rising employment rate. Investment of all types will increase, and the boom in housing construction shows no signs of slowing down.

Prices will rise in 2018 in a broad range of different product categories, but the increase in the prices of services will continue to have the greatest impact on overall inflation.

In 2019, the ministry expects Finland’s GDP to grow by 1.9%. GDP growth will slow the rise in the state’s debt burden but will not eliminate the general government deficit.

The public-debt-to-GDP ratio began to decline in 2016, and the debt ratio is shrinking due to rapid growth in Finland’s GDP. In 2019 the ratio is expected to fall to slightly below 60%.

Meanwhile, the Bank of Finland agreed that economic growth will begin to decline after peaking this year. An ageing population will also create a drag on household savings, it said.

In a new economic forecast released on Monday, the Bank of Finland predicted that private consumption will increase on the back of growing employment and a boost to consumer purchasing power. However the bank foresees households’ savings rate remaining negative and also expects them to continue to amass more debt.

By mid-2017, household debt amounted to nearly 128% of income and in 2020 that figure is set to reach 129% of income, according to the economic outlook.

The central bank expects the savings rate among households to decline due to the country’s ageing population.