Old people, Fixed Jobs to Drag Down Finland’s Next Decade Growth

Finland’s economy will grow faster than earlier predicted over the next few years, but the aging population and rigid labor markets will drag it down over the longer term, the finance ministry said on Tuesday.

Citing recovering exports, the ministry increased its growth projections for 2017, 2018 and 2019.

It now expects Finnish GDP to grow 2.9 percent this year, 2.1 percent in 2018 and 1.8 percent in 2019. In June, it had forecast growth of 2.4 percent, 1.6 percent and 1.5 percent, respectively.

But further out, in 2020 and 2021, the ministry said growth would be just 1.3 percent and 1.1 percent, respectively, and average growth in 2020-2030 would be below 1.5 percent.

“This growth sprint will be a temporary one… The general conditions for economic growth have not changed to such an extent as to increase the economy’s growth potential,” senior official Mikko Spolander told a news conference.

Finland is recovering from a decade of stagnation sparked among other things by a decline of Nokia’s (NOKIA.HE) former phone business and a recession in neighboring Russia.

Nokia was once dominant in Finland, providing 4 percent of its GDP and 20 percent of its exports.

Spolander, who is director general of the ministry’s economics department, said the time was right now for further government reforms to boost employment.

The center-right government, led by Prime Minister Juha Sipila, has aimed to boost growth and curb public debt growth by cuts in spending and workers’ benefits, but it has so far struggled to push through major reforms in the economy.

The ministry said general government debt would fall slightly below 60 percent by 2021 but said that it would bounce back up afterwards.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell