Helsinki (27.09.2013 - Heikki Jokinen) Exports will recover and the recession will ease. This is the prediction of The Labour Institute for Economic Research in their forecast for the Finnish economy 2013 - 2014. The Institute expects Finland’s gross domestic product to contract by 0.6 per cent this year. Earlier, in March this year they had forecast a 0.6 per cent rise.
The change is explained by the prolonged recession in Europe and a lower level of investments. The growth expected in neighbouring Russia and Sweden has also been slower than predicted. This has had a negative effect on Finnish exports.
An improvement in the global economy will, however, also boost the Finnish economy towards the end of the year. There are signs of accelerated economic growth throughout the whole of the European Union, even more than in the Euro area which Finland is part of. Last month’s growth has taken a turn for the better in China, Japan and Brazil.
The institute predicts that Finland’s gross domestic product will grow by 2.1 per cent next year. This is 0.3 percentage points lower than in the forecast from March 2013.
As Finnish growth is largely driven by exports, any possible growth in exports will have little impact on employment or the public sector's fiscal deficit during the forecast period.
Total exports are expected to shrink this year by 0.8 per cent. "Towards the end of the year, favourable international economic developments will begin to boost Finnish goods exports, although they will still remain 1.5 per cent lower than last year. Exports of services will increase by about one per cent, as the negative effects of Nokia’s demise starts to fade", says the forecast.
Finland's balance of trade will be close to zero this year, but in 2014 it can expect to see a surplus of 200 million euros.
Inflation is expected to be 1.6 per cent this year. In 2014 this will surely increase as new taxes on soft drinks, electricity and transport fuel are imposed. And new taxes on alcohol and tobacco alone will raise the consumer price index by over half a percentage point.
ETLA, the research institute of employers confederations have now also published their forecast for 2014. They also reckon that the euro area recession appears to be over, but growth will remain slow.
Finland’s GDP is expected to decline by 0.4 per cent in 2013 but grow by 1.6 per cent next year, ETLA predicts. The volume of exports will fall this year by one per cent but grow by some 3.5 per cent in 2014.
ETLA has also calculated the effect of Nokia’s collapse for the Finnish economy. Finland’s GDP for 2008 was 3.7 percentage points higher than this year. Nokia’s misfortunes account for 2.5 percentage points of this, ETLA estimates.
The Labour Institute for Economic Research forecast is available here in English (Pdf)