Economic growth in Finland has been slow for a prolonged period, both historically and by international comparison. In the forecast years 2015–2017, the economy will start to grow sluggishly as the export markets revive. The Finnish version of the Bank of Finland's forecast was published on 10 Jun 2015.
The effects of the Government’s economic policy programme are assessed separately in this alternative scenario, as the programme is not included in the baseline forecast. The consolidation measures, if carried through, will markedly strengthen the public finances.
The longer working careers and higher earnings of those now retiring have caused a rising trend in earnings-related pensions. As this has been accompanied by a strong increase in unemployment expenditure and slow growth in aggregate income, a growing number of households now depend on current transfers.
The effects of the Eurosystem’s expanded asset purchase programme (EAPP) are already visible on the financial markets. To a small open economy such as Finland, the effects of the programme are transmitted particularly via lower market interest rates and a weaker exchange rate.
One reason behind the shortage of new jobs is the lack of new firms, which create the largest number of jobs. The frozen labour market will slow restructuring of the economy and weakens the outlook for growth.
The sliding oil price will benefit oil-importing countries. In the euro area, the Extended Asset Purchase Programme (EAPP) has reduced funding costs, improved lending and strengthened the confidence of economic agents.
Weaker-than-expected developments in the global economy would erode Finland’s export-driven growth. On the other hand, a more prolonged period of low commodity prices and the positive effects of accommodative monetary policy on the real economy could provide a further boost to growth.