Economic growth has passed its cyclical peak

Rainy-day buffers ought to be strengthened during years of solid growth, so that fiscal space is available for tackling future recessions and other unwelcome surprises.

Weak productivity growth raises domestic production costs and hinders the competiveness of export firms as well as economic growth.

Weak productivity developments are being caused by structural changes in the economy, such as the decline of ICT manufacturing, and by the slowing of productivity growth within industries themselves.

The number of low-productivity firms in Finland is large, but average productivity is being raised by a small pack of frontrunners. Even in such frontier firms, productivity growth is mostly torpid.

Finland’s debt-to-GDP ratio doubled after the financial crisis. This trajectory is now on the decline, but population aging will raise public expenditure, and threatens to tilt the debt ratio upwards.

Finns have consumed at levels above their incomes, accumulating more debt than new wealth. Household saving is nevertheless similar to that of the other Nordic countries.

Forecast tables for the Finnish economy in 2018–2021 (December 2018).

The macroprudential toolkit needs to be replenished with borrower-based instruments that take into account loan applicants’ repayment ability and are able to curtail household indebtedness as a whole.