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Finland’s Nordea Bank Predicts Growth to Stagnate After 2020

Finland’s Nordea Bank Predicts Growth to Stagnate After 2020Finland’s Nordea Bank Predicts Growth to Stagnate After 2020

Finnish economic growth is set to keep its strong path this and next year, but the upward trend will be at a standstill after a couple of years, said Nordea Bank on Tuesday.

The Finnish economy will grow by 3% in 2018 and 2.5% in 2019, said Nordea, adding that household consumption will take over the role of key growth engine from exports and investment, thanks to positive labor market developments, Xinhua reported.

However, the bank warned that the growth will start to deteriorate at the turn of the decade. One of the major reasons is that the improved competitiveness in recent years can turn even to a deteriorating track, according to Aki Kangasharju, chief economist at Nordea Bank. The earnings level will rise this and next year by 2%. At the same time, the euro will remain strong in the near future.

“During the economic cycle, Finland’s productivity growth will be fast, but now, with the improvement of employment, it has faded again. It is difficult to imagine that the productivity growth will accelerate to over 1% over the next a few years,” said Kangasharju.

The worsening labor shortage and the decline of exports are also risk factors to the Finnish economic growth.

Furthermore, the economy is vulnerable to a significant escalation of trade tensions, and even an increase in uncertainty may be enough to cut international investment growth, which would mean slower export growth for Finland, noted Nordea.

Following three consecutive years of negative growth, the Finnish economy finally started to show some signs of recovery in 2015. Since 2016, the economy has grown gradually and achieved a bullish growth by 3.2% in 2017.

  End to Free Money

For more than a year, Finland has been testing the proposition that the best way to lift economic fortunes may be the simplest: Hand out money without rules or restrictions on how people use it.

The nation’s experiment with so-called universal basic income has captured global attention as a potentially promising way to restore economic security at a time of worry about inequality and automation.

Now, the experiment is ending. The Finnish government has opted not to continue financing it past this year, a reflection of public discomfort with the idea of dispensing government largess free of requirements that its recipients seek work.

Finland has actually reversed course on that front this year, adopting rules that threaten to cut benefits for jobless people unless they actively look for work or engage in job training.

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