Country Report Finland October 2017

Country Report Finland October 2017

  • October 2017 •
  • Report ID: 325832 •
  • Format: PDF

Outlook for 2018-22



  • The Economist Intelligence Unit expects the governing coalition to see out its full term to April 2019. It consists of the Centre Party (KESK), the National Coalition Party (KOK) and Blue Reform, a splinter group from The Finns (PS).
  • After electing a new hardline leader in June, the PS was ejected from the coalition and fragmented into two groups. One group, Blue Reform, provides the KESK and the KOK with a slim parliamentary majority of six seats.
  • Blue Reform is less hardline than the remainder of the PS and should have a more stable relationship with its coalition partners. The challenge for Blue Reform will be to carve out a political position for itself and attract PS voters.
  • For now the PS has been marginalised. However, the government's majority is significantly smaller than before, giving the party significant leverage on the opposition benches, which will hamper policymaking.
  • A revision to second-quarter GDP data has prompted an upward revision to our full-year estimate of growth in 2017, to 2.6%, from 2.1% previously. We expect the pace of growth to ease to 1.9% on average in 2018-22.
  • We expect EU-Russia sanctions to remain in place throughout the forecast period. However, a recent resurgence in trade relations and tourist flows with Russia is likely to help to support economic growth in Finland.
  • We expect the budget deficit to gradually narrow over the forecast period, having shrunk to 1.9% in 2016, from more than 3% in 2014. We forecast that public debt will fall below 60% in 2021.


Review



  • On September 5th Nordea Bank announced plans to move its headquarters from Stockholm (Sweden's capital) to Helsinki (Finland's capital), basing it inside the euro zone's banking union.
  • The European Central Bank (ECB) kept its policy stance unchanged in September. The ECB president, Mario Draghi, revealed that he expected to be able to make an announcement in October on how to "calibrate" the quantitative easing programme beyond the end of the year.
  • The quarterly change in real GDP in the second quarter was revised to growth of 0.4%, from a contraction of 0.5% reported initially. This lifted the annual growth rate by 1.4 percentage points, to 3%.
  • In August the seasonally adjusted unemployment rate was 8.8%, 0.2 percentage points higher compared with a year earlier. On the EU harmonised measure, the unemployment rate was stable year on year, at 8.7%.
  • The consumer price index (national measure) rose by 0.1% month on month in August, pulling the year-on-year change up to 0.7%, from 0.6% in July.


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