Nordea Bank predicts that the Finnish economy will not resume growth until 2016. For 2015, Nordea expects a fourth consecutive year of shrinking production -- followed by fragile growth the following year.
According to the bank's prognosis, average annual economic growth for this entire decade will be close to zero.
Nordea foresees a situation in 2015 where the Finnish economy consumes more than it produces for the first time in 20 years. Meanwhile, it says, the recovery from the long downturn is taking longer than after the severe recession of the early 1990s – a recovery that was driven by the rise of Nokia and the high-tech sector.
“When you subtract consumption from all income, there is less money left over for investment and creating something new,” says Nordea’s chief economist Aki Kangasharju. “This weakens opportunities for future growth,” he adds.
“This is an exceptional period. It is definitely weakening the future outlook in a situation where we should be looking for a new industrial base to replace the lost capacity of Nokia and the forest industry,” Kangasharju asserts.
Nordea says that Finland needs quick action to boost the economy, including more corporate tax revenues.
To do this, says Kangasharju, “we need reductions in labour costs to improve the export sector’s competitiveness and tax cuts to support domestic purchasing power.”
Meanwhile public spending should be lowered and municipal responsibility limited. Kangasharju urges the government to speedily carry through its planned structural reform package – though he adds that “even that won’t be enough.”