Throughout 2016–2018 the Finnish economy will grow by around 1% per annum and investment will finally begin to increase. With exports still sluggish, however, growth will depend on domestic demand. Inflation will be slow throughout the forecast period.
House prices in the Helsinki Metropolitan Area have long been rising faster than in the rest of Finland. Developments have been influenced by regulatory controls and the low interest rates on housing loans.
Among the set of new firms there are those known as ’gazelles’, firms that rapidly increase their employment. This small group of high-growth firms generates a disproportionate share of new jobs.
Finland is now facing problems similar to those with which Japan has already struggled for more than a decade. The population is ageing and the public finances are moving deeper into debt.
Achievement of the employment objective in the Government programme will require GDP growth of 1.3 percentage points faster than estimated in the Bank of Finland’s baseline forecast.
Precise information on the current state of the economy comes only with a considerable time delay, although many economic decisions require the support of real-time data. Before official statistics are released, the situation is nowcast using short-term forecasting models.
Finland’s demographic structure and the age structure of the labour force are changing as the baby-boomers retire. Weak employment among the young has been compensated by a higher employment rate among older cohorts.
The growth in private demand that has bolstered the economy has been accompanied by continued growth in the levels of household debt. Risks relating to this can be controlled centrally using macroprudential policy.
