Country Report Finland September 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 government spending and 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 3% of GDP in 2009 and 5% in 2010, after an estimated surplus of 4.2% of GDP in 2008.
• The global economic downturn will have a serious impact on Finland's open and export-oriented economy: real GDP is forecast to contract by 6.8% in 2009 and only recover gradually to a weak 0.8% in 2010.
• 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 1.2% in 2009 and 1.3% in 2010, but to remain higher than the euro zone average.
• As a proportion of GDP, the current-account surplus is likely to decline in 2009 and remain low in 2010.

Monthly review

• The government's decision to renege on its promise to increase its budget contribution for international development aid sparked a fierce reaction from various development organisations and caused uproar within the Green Party.
• The government is set to reach a decision by the end of 2009 on the need for? additional nuclear power stations. The issue could complicate relations between the coalition partners.
• As per the final version of the 2010 budget proposal, value-added tax on food is to be lowered from 17% to 12% in October and then increased to 13% in July 2010. A further ???230m will be allocated to addressing rising unemployment.
• The government is to provide some modest support to the airline industry by reducing the fees charged to airline operators by the state-owned Civil Aviation Authority, Finavia, which runs Finland's network of airports.
• Real GDP fell again in the second quarter of 2009, by 2.6% quarter on quarter, bringing the annual rate of decline to 8.9% (seasonally adjusted). This was the steepest second-quarter decline in the euro area.
• Weak global demand in the second quarter was reflected in another fall in sales for a telecommunications equipment manufacturer, Nokia, but there are indications that demand in the sector may now have bottomed out.

Source: Country Report

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