Country Report Finland

Outlook for 2008-09

• The Economist Intelligence Unit believes that the four-party coalition will continue, despite a considerable blow to its standing following revelations of non-declaration of funding to leading politicians in the two largest parties.
• The government will co-operate more closely with NATO and remain committed to the EU, despite some increase in euroscepticism.
• There will be moderate tax cuts aimed at boosting employment in the 2009 budget, financed by a large government surplus.
• GDP is forecast to slow to 2.8% in 2008 and 2.3% in 2009. Domestic demand, although slowing, will remain stronger than the average for the euro area, with employment growing strongly.
• Inflation has risen sharply and will remain around 3.5% in 2008 (EU harmonised measure), but should fall to 2% on average in 2009.
• The current-account surplus is likely to narrow, but remain quite substantial.

Monthly review

• The three main political parties, especially the Conservatives and the Centre Party, have been severely embarrassed by revelations that prominent members of parliament failed to declare donations.
• The prime minister, Matti Vanhanen, has recognised that the revelations could lead to a feeling amongst the electorate that political decisions are more influenced by the opinions of lobbyists than by those of voters.
• The unions have taken the initiative in proposing rules to prevent strikes from putting lives at risk, following controversy over the strike in the health service in 2007.
• Financial services supervision is to be reorganised from the beginning of 2009, with insurance merged with other financial services.
• There was a significant slowdown, after adjusting for working days, of economic activity in March, but a bounce back in industrial production in April suggests that this may not be the beginning of a downward trend.
• Employment has risen by 45,000 in a year, nearly one-half the government's target over four years.
• Inflation has been running at well over 3% in the first four months of 2008, partly owing to rising international energy and food prices, but also to higher housing costs. Nevertheless, there has been a significant slowdown in house prices.

SOURCE: Country Report