The economic upswing in Finland has strengthened, bolstered by the improved performance of exports. Despite the improved growth, Finland’s external indebtedness will continue to grow. GDP is forecast to grow 2.1% in 2017, 1.7% in 2018 and 1.4% in 2019.
In both the United States and the euro area, economic growth has picked up and the labour market has strengthened without the build-up of significant wage and price pressures. This raises the question as to how far the economy can still be from its potential output.
The few ‘superstars’ of high productivity and profitability stand out in the large mass of firms. A one-size-fits-all economic policy is unsuitable in an environment of considerable heterogeneity in productivity and profitability.
Exports and productivity could grow faster than estimated in the Bank of Finland’s baseline forecast. However, a temporary period of faster growth would not suffice to resolve the problems with fiscal sustainability.
The faster growth will ameliorate the problems in the economy, but not solve them. The industrial base has narrowed, unemployment is high and the public finances are in deficit. It is important to continue the corrective measures in the economy.