Country Report Finland November 2008

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 boosting employment in the 2009 budget, financed by a large government surplus.
• The ongoing bout of global financial market instability will have a direct impact on the Finnish economy, leading to contracting investment and external demand in 2009, before a pick-up in 2010.
• Although real GDP growth will still be stronger than the average for the euro area, growth is forecast to fall from an estimated 2.6% in 2008 to 0.4% in 2009, before picking up to 1.5% in 2010 as the world economy recovers gradually.
• Inflation, which has risen sharply so far in 2008 and will average an estimated 4.1% (EU harmonised measure), is forecast to fall to an average of 2% in 2009 and 1.6% in 2010.
• As a proportion of GDP, the current-account surplus is likely to continue its decline over 2009-10, but will remain substantial.

Monthly review

• The National Coalition Party (Conservatives, or KOK) emerged as Finlands biggest party in the municipal elections at the end of October.
• The municipal elections also marked a breakthrough for the right-wing populist party True Finns, which increased its support by 4.5 percentage points, gaining nearly six times as many votes as in the previous elections.
• The financial authorities in Finland and Iceland have approved a system intended to ensure the repayment of the deposits that have been frozen at the Finnish branch office of the failed Icelandic bank Kaupthing.
• More details have emerged of the proposed system for providing state guarantees for borrowing by the countrys commercial banks. The bill also includes provisions for direct equity injections by the government.
• The overall consumer confidence index dropped sharply in October. The index stood at +8.7 in August, dropped slightly to +8.1 in September, but slumped to -0.2 in October.
• Finnish equity prices stabilised to some extent after the announcement in early October of financial stabilisation packages by a range of European countries. Three-month money market rates have also fallen back.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;65
NAICS Code: 52;53