Danske Bank economists forecasted Monday that this year the economy would rally feebly to post growth figures of just 0.5 percent. The Finnish economy had previously posted zero or negative growth for three consecutive years.
Efforts to get the economy rolling again will be fettered by consumer caution, weak purchasing power, a shortage of investments and public sector spending cuts. However, low inflation and cheap borrowing rates will ease the situation in most households.
Accelerating growth in the global economy will begin to trickle into Finland, so that the economists forecast growth for 2016 at a relatively attractive 1.5 percent. However,they say that going forward economic output will remain modest – unless the new government pushes ahead with major structural reforms.
“The Finnish economy is looking at fragile growth in 2015 and 2016, which means that in addition to structural reforms, the new government will come under pressure in terms of fiscal policy. The government will have to decide in spending cuts to the tune of several million euros. The state’s credit rating could be cut again if government can’t implement its structural reforms,” cautioned Danske Bank chief economist Pasi Kuoppamäki.
The prognosis casts the prospects of the Finnish economy against the backdrop of accelerating growth in the global economy this year.
“The US economy has continued to grow from strength to strength and this development will also continue this year. The US is preparing to increase interest rates while in Europe we are only just new monetary policy designed to boos recovery,” noted economist Henna Mikkonen.
Growth has also been sluggish in Finland’s main European export markets, but in future many factors will help support a European economic recovery. The most significant is the weakening of the euro, falling oil prices and a very aggressive stimulus programme by the European Central bank.