Country Report Finland January 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.
• There will be tax cuts aimed at stimulating the economy and boosting employment in the 2009 budget, financed by a large government surplus in recent years.
• -1.3% in 2009, before picking up to 0.6% in 2010.
• Inflation, which rose sharply throughout most of 2008 and averaged 4% (EU harmonised measure) for the year, is forecast to fall to an average of 1.2% in 2009 and 1.4% in 2010.
• -0.4% in 2010, following an estimated surplus of 4.6% 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

• In spite of the international economic downturn hitting Finland, the centre-right four-party coalition government has continued to see a significant rise in its popularity.
• The proposals of a committee on the social security framework, which are expected to be published by the end of January 2009, are likely to spark intense debate between the government and the opposition.
• A government-appointed commission established to recommend measures to ease the impact of the financial crisis on businesses reported its conclusions in early January.
• The government proposal to reduce the sales tax on raw timber was approved by parliament in December 2008. The reductions will halve the tax on timber sales for 2009, and reduce it by 25% from current levels in 2010.
• The labour market has begun to deteriorate, with firms planning permanent reductions in their workforces and announcing temporary lay-offs.
• Consumer price inflation fell again in December, to 3.4% (EU harmonised measure), but remained much higher than the euro zone average of 1.6%.

Source: Country Report