The nation was hoping for economic turnaround this year.
Instead, 2015 threatens to become Finland’s fourth consecutive year of recession. Only the most optimistic of economists surveyed in an Yle poll predicted even a pause in the decline. Many experts said they believed that cutting labor costs is essential but still insufficient to alleviate the financial gloom.
Economists are far from exuberant in their characterisation of Finnish finances. Words like dismal, weak, low-key and no change abound in their responses.
Even the optimistic forecasters aren’t hoping for too much. For example, forecast manager from the Labour Institute for Economic Research, Eero Lehto, says he thinks the economic situation will straighten out – according to him, the positive turnaround has already taken place. However, Lehto also posits that, amongst other things, tight taxation policies are curtailing growth.
The most common perception amongst economists is that economic growth will – at best – be zero this year.
There was no unanimous agreement on whether or not Finland was in recession or a long-term downturn, but regardless of the semantics, economic gloom has been ongoing for seven years, since 2008.
Negative and zero-growth is also reflected in unemployment. OP’s chief economist Reijo Heiskanen estimates that unemployment will rise next spring to around 10 percent. Danske Bank’s Pasi Kuoppamäki puts that figure at over 12 percent while more moderate estimates suggest that it will remain at current levels.
Social contract won’t go far enough
Finland’s essential problem is a lacklustre global economy. Exports are difficult to get up and running when demand freezes up. Promising rumblings in Europe are not yet changing the picture in any dramatic way.
“When the market doesn’t grow, we can only increase exports by winning market share from others,” explains Nordea’s chief bean counter Aki Kangasharju. He adds that it will require a much greater shift before Finland can ride the wave to better finances.
Economists also saw the reduction of labor costs as vital.
“The extension of working hours is one option here, and probably the easiest,” says economist Janne Huovari from the Pellervo Institute for economic research.
Most respondents thought that a so-called “social contract” on labour market conditions was not unnecessary, although few thought that it would go far enough.
However, many experts believe that a cohesive agreement on labour conditions would play an important indirect role in establishing confidence in Finland’s ability to agree on key issues. This, in turn, experts hope, would encourage investments.
Related stories from around the North:
Canada: Metal, mineral price drop affecting Canada’s North, Eye on the Arctic
Finland: Finland to save Talvivaara mining operations, Yle News
Norway: Low oil prices taking toll on Norway drilling, Barents Observer
Russia: Seismic work continues in Arctic despite sanctions: Russia, Barents Observer
United States: U.S. federal official says continued low oil prices could threaten trans-Alaska pipeline, Alaska Dispatch News