Country Report Finland February 2009

Outlook for 2009-10

• The Economist Intelligence Unit believes that the four-party coalition will hold together over the next two years.
• The government will co-operate more closely with NATO and remain committed to the EU, despite some increase in Euroscepticism.
• The government will use spending increases and tax cuts as in the 2009 budget, together with extra economic stimulus measures, in the hope of stimulating the economy and boosting employment.
• As such a highly export-oriented economy, Finland will be seriously affected by the global economic downturn: real GDP growth is forecast to fall from an estimated 1.4% in 2008 to -2.8% in 2009, before picking up to 0.5% in 2010.
• Inflation, which rose sharply throughout most of 2008 and averaged 3.9% (EU harmonised measure) for the year, is forecast to fall to an average of 0.7% in 2009 and 1.2% in 2010.
• Increased spending to stimulate the economy and weaker revenue growth will see the general government budget fall into deficit, at -4.1% of GDP in 2009 and -3.7% in 2010, after an estimated surplus of 3.4% of GDP in 2008.
• As a proportion of GDP, the current-account surplus is likely to continue its decline in 2009-10, but will remain substantial.

Monthly review

• The government presented its long-awaited security and defence policy doctrine. There were two important shifts in opinion compared with its predecessor four years ago with regard to Russia and NATO membership.
• The government's additional economic stimulus measures presented towards the end of January 2009 amount to a total of €2bn, split between stimulating construction and reductions in social insurance contributions.
• The government has taken further steps to shore up confidence in the financial markets, including a programme offering direct state capital injections into deposit-taking banks.
• The economy deteriorated rapidly in the fourth quarter of 2008. Preliminary statistics put an end to the possibility that Finland would not be as badly hit as other euro zone members during the global economic downturn.
• Industrial production worsened in December, showing a working-day-adjusted year-on-year fall in output of 15.6%.
• According to preliminary data, the fall in the prices of dwellings in existing blocks of flats and terraced houses accelerated in the fourth quarter of 2008.

This report covers the following industry codes:
SIC Code: 65;37
NAICS Code: 53;336