Juha Kilponen Suomen Pankki Upswing more broadly based Improved chances for balanced growth in Finland 18.12.2017 18.12.2017 Julkinen 1
Overall picture of the economy Growth has broadened to exports and productivity growth has improved Current account close to balance in the forecast period Household debt increases further, situation for other economic sectors improves Unemployment decreases slowly as supply factors restrict availability of labour Inflation below euro area average Julkinen 2
Key figures for the Finnish economy 2017 f=forecast Sources: Bank of Finland and Statistics Finland. Julkinen 3
Conditions for continued growth in place Finland s export markets growing at a rate of slightly over 4% in the forecast period Financing conditions remain favourable Cost-competitiveness has improved Productivity improved and employment growing, albeit slowly Confidence indicator and short-term information point to continued growth Julkinen 4
GDP growth forecast revised upward GDP volume % change on previous year (right-hand scale) At reference year (2010) prices (left-hand scale) GDP, % 220 EUR billion % 10 December June 200 180 160 140 5 0-5 -10 2000 2005 2010 2015 2020 Sources: Statistics Finland and Bank of Finland. 2017f 3.1 2.1 2018f 2.5 1.7 2019f 1.6 1.4 2020f 1.4 -- f = forecast 18 Dec 2017 bofbulletin.fi 24078 @E&T 3_2017 Julkinen 5
Inflation remains moderate throughout the forecast period Inflation and price level relative to euro area 5 4 3 2 1 0-1 Price level in Finland (right-hand scale) Inflation in Finland (left-hand scale) Inflation in the euro area (left-hand scale) Inflation, annual average, % Price level relative to euro area + 30 % + 25 % + 20 % + 15 % + 10 % + 5 % + 0 % 1999 2002 2005 2008 2011 2014 2017 2020 Sources: Bank of Finland, Eurostat and European Central Bank. Inflation, % Finland Euro area 2017f 0.8 1.5 2018f 1.1 1.4 2019f 1.4 1.5 2020f 1.5 1.7 f = forecast. 18 Dec 2017 bofbulletin.fi 31705@E&T_5_2017(en) Julkinen 6
Growth in compensation of employees supports improvement in costcompetitiveness Wages, inflation and productivity Compensation of employees*, % Inflation, % *Per employee, total economy. f = forecast. Sources: Bank of Finland and Statistics Finland. Productivity*, % 2017f -0.6 0.8 2.3 2018f 1.3 1.1 1.8 2019f 2.0 1.4 1.1 2020f 2.8 1.5 1.1 Julkinen 7
Balance of supply and demand at reference year (2010) prices % change on previous year 2017f 2018f 2019f 2020f Revision GDP 3.1 2.5 1.6 1.4 Private consumption 1.9 1.8 1.3 1.0 Public consumption 0.5 0.7 0.1 0.4 Private fixed investment 11.2 5.8 3.2 2.5 Public fixed investment -1.1 3.3-0.5-1.2 Exports 8.4 3.8 3.5 3.0 Imports 2.2 3.4 2.9 2.7 f = forecast. Sources: Statistics Finland and Bank of Finland. Julkinen 8
Factors underlying investment and export growth External demand, monetary policy and domestic cost developments have supported investment and export growth Investment growth strongest in construction About 2/3 of pick-up in exports in 2015 2017 explained by external factors Impact of domestic cost factor more moderate during 2015-2017 Julkinen 9
Finland getting back on track of the global economy Value of goods and services exports Global Finland Forecast 250 Index, 2000 = 100 200 150 100 50 0 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Sources: Statistics Finland, World Bank and the Bank of Finland forecast. Julkinen 10
Towards more balanced growth? Current account items Goods Services Primary income Current transfers Forecast Current account 5000 EUR million per quarter 4000 3000 2000 1000 0-1000 -2000-3000 1990 1996 2002 2008 2014 2020 Sources: Statistics Finland and the Bank of Finland forecast. Julkinen 11
based on corporate sector net lending 5000 4000 3000 2000 1000 0-1000 -2000-3000 Current account and net lending by sector Non-financial corporations (S11 + S12) Households (S14 + S15) Forecast EUR million per quarter General government (S13) Current account -4000 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source: Statistics Finland and the Bank of Finland forecast. 30219@Vaihtotase_sektorit(en) Julkinen 12
Households willingness to save low Savings ratio Households real disposable income Real private consumption 5 % 4 3 2 1 0-1 -2-3 -4 2009 2011 2013 2015 2017 2019 Households = households and non-profit corporations serving households. * % change on previous year. Sources: Statistics Finland and Bank of Finland. 18 Dec 2017 bofbulletin.fi 19912@ET_2017 tulot ja kulutus EN Julkinen 13
Slow recovery in labour markets 72 Employment rate, 15 64-year-olds, trend (left-hand scale) Unemployment rate, 15 74-year-olds, trend (right-hand scale) % % 12 70 10 Employment and unemployment rate 68 8 Employment, % Unemployment, % 2017f 69.3 8.6 2018f 69.9 8.2 66 6 2019f 70.4 7.9 2020f 70.7 7.6 64 2002 2007 2012 2017 Sources: Statistics Finland and Bank of Finland (forecasts). 4 f = forecast. 218 Dec 2017 bofbulletin.fi 25192@Työllisyyden muutos trendi Julkinen 14
Increase in mismatch problems 50 000 Job vacancies 45 000 40 000 35 000 2008M1 50000 2017M2 2017M8 2016M8 2015M7 High structural unemployment 30 000 25 000 20 000 2000M1 15 000 150 000 200 000 250 000 300 000 350 000 400 000 Unemployed jobseekers Julkinen 15
Structural unemployment still high 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 % Unemployment rate (Ministry of Employment and the Economy)* Structural unemployment (BoF) 0.0 1980 1985 1990 1995 2000 2005 2010 2015 *Seasonal adjusted, BoF. Sources: Ministry of Employment and the Economy, Statistics Finland and Bank fo Finland. 18 Dec 2017 eurojatalous.fi 35461@Chart3 Flows out of unemployment slower since the financial crisis Unemployment currently close to the structural level Employment probability is, however, improving Julkinen 16
Fiscal policy to ease despite reduction in deficit General government deficit shrinks by over half -1.8% 2016-0.7% 2020 However, cyclically adjusted deficit will increase Cyclical and structural factors justify tighter fiscal policy in the next few years Fiscal sustainability gap still around 3% Julkinen 17
70 60 50 DEBT/GDP 41.7-2.3 pp 40 38.2 34.0 32.7 Less new debt and a drop in the tax ratio Public debt and total tax ratio Debt % of GDP Total tax ratio (right-hand scale) 47.1 48.5 53.9 56.5 % of GDP 60.2 63.6 63.1 61.8 61.3 61.4 60.8 54 51 48 45 TAX RATIO -3.3 pp 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 f2017 f2018 f2019 f2020 Sources: Statistics Finlad, Bank of Finland (forecasts). 42 39 36 33 18 Dec 2017 bofbulletin.fi 34005@Chart4 Julkinen 18
Impact on GDP growth forecast of uncertainty relating to external factors 4 %, annual growth GDP 3.5 3 3.5 % 2.5 2 1.5 1 1.5 % 0.5 0-0.5 2014 2015 2016 2017 2018 2019 2020-1 Sources: European Comission and Bank of Finland. 18 Dec 017 eurojatalous.fi 35463@Chart1 Julkinen 19
Thank you! Julkinen 20