Invest in Finland

EU Commission forecasts fast recovery for Finnish economy

29/01/2009

The outlook for the global economy is bleak but Finland’s economy is set to recover faster from the downturn than most other EU member states. This is the optimistic view from the European Commission, which evaluated the economic prospects of the member states in January amid what it called “exceptional uncertainty about global developments”.

The reasons for Finland’s relatively strong macro-economic outlook are based on the country’s solid performance during the past decade, when it has consistently enjoyed a faster growth rate than the EU average. This has prepared Finland’s economy better than most to face the downturn and now gives the Finnish government more room for manoeuvre in its reflationary policies.

Healthy budget surpluses, low levels of public indebtedness and strong competitiveness have characterized the Finnish economy in recent years. Significantly, the Commission already noted in the autumn that “Finland’s financial sector is relatively well shielded from the direct impacts of the global crisis”.

As a result, the Finnish government’s active measures to fend off the effects of the recession are more likely to succeed – and do so faster – than in many other countries. Although a rise in unemployment seems unavoidable, the government is determined to keep the recession as short as possible by implementing a series of measures to stimulate the economy. These include tax cuts, increased public spending and support for the financial sector to ensure that credit remains readily available.

According to the European Commission’s forecast, Finland’s real GDP is expected to fall by 1.2% this year, compared to an average of almost 2% for the EU as a whole. The expected recovery in 2010 is estimated to bring 1.2% growth in the Finnish economy, which is markedly better than the EU average of 0.5%. Finland’s inflation rate is forecast to remain steady at 1.8% both in 2009 and 2010.