Thu, Jun 11, 2015 - Page 15 News List

Finnish central bank sees some signs of growth

Bloomberg

Finland may see gradual economic growth this year as its export markets start to recover, according to the central bank.

The Bank of Finland raised its projection for the northernmost euro member, and now sees economic expansion of 0.2 percent, versus the 0.1 percent contraction forecast in December last year, it said on yesteday. GDP growth will accelerate to 1.2 percent next year and 1.3 percent in 2017, it said.

Though the forecasts represent an improvement, they still reveal a much weaker recovery in Finland than in the eurozone on average.

“Finland will not reach the euro area pace of growth even in the next few years,” the central bank said.

The pace of Finland’s output expansion “could turn out to be even lower if the global economy were to improve more slowly than expected,” it said.

Finland’s economy has contracted since 2012 after its consumer electronics industry disappeared and demand for newsprint declined, depleting its manufacturing base. At the same time, a deterioration in labor-cost competitiveness and Europe’s ongoing economic crisis sapped demand for its exports.

“The Finnish economy is facing headwinds, with no strong growth recovery in view,” Bank of FinlandGovernor Erkki Liikanen said in the report.

The new government says it is pursuing a swathe of measures to plug a 10 billion euro (US$11.3 billion) gap in long-term finances. It wants to improve productivity by negotiating a social contract with trade unions and employers that would moderate wage gains, as well as balance public finances through spending cuts. It is also pushing for an economic overhaul.

“The scale of the fiscal adjustments envisaged by the government is justified,” Liikanen said. “Population aging will already weigh more on the general government fiscal balance in the next decade.”

Three prominent Finnish business leaders on Tuesday vowed to take a 5 percent pay cut to support the government’s push for across-the-board wage reductions and urged other to do the same.

“I myself have decided to donate annually a significant amount of money over the next four years, with a focus on education and research,” Confederation of Finnish Industries head Matti Alahuhta said.

Additional reporting by AFP

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