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Country Forecast Finland February 2012 Updater

  • Publication Date:February 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:17

Country Forecast Finland February 2012 Updater

Overview

The six-party coalition that was installed in June 2011 is more diverse than usual and this poses challenges to political stability. However, it has agreed on a programme of expenditure cuts and indirect tax rises, many of which are in the 2012 budget. The coalition does not include The Finns (a populist and anti-EU party that wants severe restrictions on immigration), although it made significant gains at the general election in April 2011. Finland will be reluctant to participate in further measures to support weak euro zone countries after securing a controversial deal on collateral for its contribution to the second Greek bail-out. The Finnish economy will be adversely affected by the euro zone crisis. The Economist Intelligence Unit forecasts that after GDP growth of 3.6% in 2010 and an estimated 2.6% in 2011, GDP will decline by 1.1% in 2012, followed by only a weak recovery to average growth of 1.3% over 2013-16. Inflation is forecast to average 3% in 2012 and about 2.4% during 2013-16.

Key changes from last month

Political outlook

Conservative Sauli Niinisto won the second-round presidential election run-off. He will offer a stronger argument in support of the EU and is also likely to seek to steer Finland closer to the US. He can be expected to direct greater attention to boosting Finnish exports in key overseas markets and to try to improve foreign investment flows into the country.

Economic policy outlook

Weakening public finances have led the government to consider new tax-raising and public-spending-reduction measures, which may include the reintroduction of a wealth tax and new value-added tax hikes. The government also hopes to make efficiency gains through municipal reform.

Economic forecast

The downsizing of production and research and development by major employers like Nokia is a major concern. High wages are undermining export competitiveness, and we expect export demand to remain fragile. We maintain our forecast of an economic contraction of 1.1% in 2012, followed by meagre growth in 2013.

Please Note: Due to the Nature of This Report The Toc is Not Available

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