The Finnish Institute for Economic Development ETLA predicts that Finland’s gross domestic product (GDP) will grow by 2.9% during 2017.
That’s the headline in a new study, published this morning and will be welcome news for politicians and the business community.
The Institute also predicts a 2% GDP egrowth for 2018 and another 1.8% growth in 2019, which are positive indicators for a country that relies heavily on exports to prop up the economy.
“The economic outlook for the euro zone and China has improved considerably, and this is reflected in the better-than-anticipated growth in exports and investments” says Markku Kotilainen, ETLA’s Senior Research Director.
“In addition, Finnish households have been willing to spend more than expected in the spring” he adds.
Competitiveness & Costs
ETLA estimates that Finland’s exports will grow by 6% this year, but slow to 3% in 2018. Consumer prices, on the other hand, will rise by 0.8% this year, while the unemployment rate is predicted to drop to 8.5%.
The Institute’s report notes that the fairly positive export forecast is based on improved competitiveness among Finnish workers. Finnish workers are much more expensive, per hour, when compared with workers in nearby countries like Germany, Sweden or Estonia, and that pushes up the price of things that are made in Finland.
While ETLA says the overall economic situation in Finland has improved, there are global economic factors at play which could still impact the Finnish economy further down the line.
While America’s GDP is estimated to grow by more than 2% annually from 2017 to 2019, driven largely by domestic demand, Donald Trump’s policies are “a major source of uncertainty” according to the Institute’s report. “Especially regarding fiscal and trade policy” they say, noting that “recently, President Trump’s protectionist speeches have aroused concern”.
Across Europe, ETLA says anticipation of Brexit is hampering Britain’s economic growth; while in other EU countries high unemployment will slow down the acceleration of inflation; and in Russia, the new report says GDP will increase by about 1.5% annually between 2017 and 2019 since energy prices are no longer decreasing, but warns that sustained growth in Russia’s economy will only happen if reforms are speeded up.