Outlook to Finnish Economy

Transcription

1 Member of the Board Marja Nykänen Bank of Finland Outlook to Finnish Economy Estonia / Finland 200 seminar, Tallinn Unrestricted 1

2 Finland has gone through an extraordinary decade Country specific shocks Financial crisis European debt crisis Recovery, which started as late as 2016 Unrestricted 2

3 GDP volume June 2017: Upswing strengthens GDP finally above the level of 2008 % change on previous year (right-hand scale) At reference year (2010) prices (left-hand scale) 220 EUR billion % 10 GDP, % March 17 June f f f Sources: Statistics Finland and Bank of Finland. 13 Jun 2017 bofbulletin.fi 3_ Member of the Board Marja Nykänen Suomen Pankki Finlands Bank Bank of Finland Unrestricted 3

4 Despite of recovery Finland has long way to go Gross domestic product Sweden Germany Estonia Euro area Finland 120 Index, 2008Q1 = Source: Eurostat Member of the Board Marja Nykänen Suomen Pankki Finlands Bank Bank of Finland Unrestricted 4

5 Period of low growth has left a long shadow to the economy % of GDP 0,90 Exports Private investment Consumption 0,80 0,79 0,70 0,70 0,60 0,50 0,44 0,40 0,35 0,30 0,20 0,21 0,18 0,10 0, Source: Statistics of Finland Unrestricted 5

6 Consumption smoothing has been financed by debt accumulation Private and general government debt % of income 140% Household debt General government debt 126,4 % 120% 107,6 % 100% 80% 60% 63,1 % 40% 34,0 % 20% 0% Source: Statistics of Finland and Bank of Finland. Household debt is expressed relative to the disposable income and general government debt relative to the GDP Unrestricted 6

7 Return to growth in 2016 Initially the recovery has been led by private consumption and (construction) investment Accommodative monetary policy have played important role Exports started to recover in late 2016 Improvement of employment has been relatively muted Wage growth and inflation moderate Unrestricted 7

8 Estimated impact of the ECB quantitative easing on the Finnish economy Effects on the level of GDP and prices 0.60 % GDP, Finland 0.40 % Prices (HICP), Finland Source: Bank of Finland, Unrestricted 8

9 Exports rebound strongly in early 2017 Exports of goods and services Goods and services Goods Services 160 Index, 2005 = Seasonally adjusted figures Source: Statistics Finland. Unrestricted 9

10 Relative to other EU countries employment improves only moderately Lähde: Eurostat Unrestricted 10

11 What can explain the recent development? Secular stagnation in Finland: A combination of weak external demand and slowdown of productivity growth Series of large external shocks Rigidities hindered the adjustment and led to weakening of productivity growth External competitiveness deteriorated Recovery rests now mainly on the reversal of above mentioned factors that led to stagnation Unrestricted 11

12 Finland's major challenges Maintain the momentum for recovery Increase labor force participation and employment Crucial, since population is ageing and labor markets are tightening rapidly Continue deregulating domestic product and service markets Improve cost competitiveness Deleverage household and public sector Unrestricted 12

13 Thank Unrestricted 13