Country Report Finland July 2009

Outlook for 2009-10

• Despite disagreement between the parties intensifying, the Economist Intelligence Unit believes that the four-party coalition will hold together over the next two years.
• The government is using spending increases and tax cuts in its 2009 budget, in the hope of stimulating the economy and boosting employment. Further tax cuts are to be implemented in 2010.
• Increased spending, tax cuts and weaker revenue growth are expected to cause the general government budget to fall into deficit, at 2.6% of GDP in 2009 and 4.4% in 2010, after an estimated surplus of 4.2% of GDP in 2008.
• Given Finland's open and export-oriented economy, the global economic downturn will have a serious impact: real GDP growth is forecast to fall by 5.7% in 2009 and by 0.1% in 2010, after growth of only 0.7% in 2008.
• Inflation, which was high during most of 2008 and averaged 3.9% (EU harmonised measure) for the year, is forecast to fall to an average of 0.9% and 1% in 2009 and 2010 respectively.
• As a proportion of GDP, the current-account surplus is likely to decline in 2009 and remain low in 2010.

Monthly review

• The prime minister, Matti Vanhanen, and his Centre Party (KESK) have come under fire again as new details of the election funding scandal that erupted a year ago came to light in June.
• Anni Sinnemaki, who is 35, was elected as the new leader of the Green Party in June. She has also taken over the post of minister of employment in the government cabinet from her predecessor, Tarja Cronberg.
• The sharp fall in output registered in the first quarter of 2009 had a significant detrimental impact on government finances, with expenditure rising and revenue falling compared with a year earlier.
• Government borrowing figures for the first quarter indicate that the level of outstanding general government debt increased by 7.5bn compared with the end of 2008, mainly because of a rise in central government debt.
• A consumer survey for June showed a marked recovery in overall sentiment. The increase reflects greater confidence in households' own financial situations and less gloomy views with regard to employment prospects.
• Some of the earlier optimism of an early economic recovery has been tempered by weak results from some of the country's major companies, including two telecommunications companies, Nokia and TeliaSonera.

This report covers the following industry codes:
SIC Code: 49;60;53;37
NAICS Code: 22;52;44;336