Country Forecast Finland October 2015 Updater

Country Forecast Finland October 2015 Updater



  • Following the general election on April 19th, Finland's new government is led by the Centre Party (KESK) and includes the far-right The Finns (PS) and the centre-right National Coalition Party (Conservatives, or KOK). The three parties hold a comfortable majority in parliament. The prime minister and leader of the KESK, Juha Sipila, based his choice of coalition partners on areas of policy consensus. The PS has softened its hardline stance and has reversed its policy position, notably on immigration and EU bail-outs, since entering government.
  • Ultimately, however, the PS's capitulation is likely to undermine political stability. The Economist Intelligence Unit's baseline forecast is that growing disenchantment among its supporters will lead to a fracturing of the PS and the replacement of Timo Soini as its leader, ultimately weakening the party's resolve to remain in government. The coalition partners are likely to respond to the PS's withdrawal either by seeking to open negotiations with one or more opposition parties (to the right or the left), or by resigning and calling a fresh election.
  • The general government deficit stood at 3.2% of GDP in 2014, its highest level since 1996. A more aggressive fiscal adjustment programme from the new administration is likely to see the deficit reduced to 2.5% of GDP in 2015 and then continuing to narrow before reaching balance by the end of the forecast period in 2019. The public debt/GDP ratio is likely to peak at 61.9% in 2016, above the EU's Stability and Growth Pact threshold, before falling to around 59% by 2019.
  • After economic contractions of 1.1% in 2013 and 0.4% in 2014, The Economist Intelligence Unit expects a mild expansion in real GDP growth, of 0.3%, in 2015. Despite a deteriorating labour market, private consumption growth should be supported by a recent sharp recovery in sentiment and a concession on mortgage repayments from banks during 2015. Average annual real GDP growth is projected to pick up to 1.6% in 2016-19.
  • Based on data from the first half of the year, we expect the current account to return to surplus in 2015 as weak domestic demand weighs on goods imports. The external sector will exert a slightly positive influence during the forecast period, which rises as the global backdrop improves.
  • Inflation (EU harmonised measure) moderated to 1.2% in 2014, from 2.2% in 2013. International oil prices remain close to levels seen following their sharp decline in late 2014, and domestic price pressures remain weak. We expect mild deflation of 0.2% in 2015, before inflation returns to 1.7% on average in 2016-19.


Country Forecast Finland October 2015 Updater
Country forecast overview: Highlights
Country forecast overview: Key indicators
Country forecast overview: Business environment rankings
Country forecast overview: Finland's business environment at a glance
Fact sheet
Outlook for 2015-19: Political stability
Outlook for 2015-19: Election watch
Outlook for 2015-19: International relations
Outlook for 2015-19: Policy trends
Outlook for 2015-19: Fiscal policy
Outlook for 2015-19: Monetary policy
Outlook for 2015-19: Economic growth
Outlook for 2015-19: Inflation
Outlook for 2015-19: Exchange rates
Outlook for 2015-19: External sector
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Gross domestic product by sector of origin
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data sources and definitions

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