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IMF: Looming external threats to Finnish economy

A team from the International Monetary Fund estimated that the ongoing European economic crisis will put a drag on the Finnish economy, slowing growth to just 0.5 percent this year.

Mies pitelee kahden euron ja kymmenen markan kolikoita.
Image: Seppo Sarkkinen / YLE

External threats will cast a shadow over economic development in Finland in the short term, according to a team of advisors from the International Monetary Fund.

The team evaluated the Finnish economy, and on Monday concluded that a significant weakening of economic activity in the euro area could have a major impact on Finland.

Because of these factors, the IMF forecast economic growth in Finland at just .5 percent this year, adding that growth will pick up slightly during 2013.

In spite of the turbulent times, the Finnish economy stands on strong fundamentals, the IMF said. With banks in other euro states struggling for cash, Finnish banks are relatively well-funded, although they have seen their profits shrink due to low margins and increasing competition for retail business.

However, the IMF did find some reasons for concern in the concentration of the Finnish banking sector, with its relatively few major players, most of which are based outside the country.

The housing market was considered to be relatively stable by the monetary watchdog, however it cautioned that the relatively low interest rates could tempt households into taking risks. Such risks would grow, if interest rates were to rise, or unemployment increase.

According to the IMF over the longer term, the biggest threats to the Finnish economy are its ageing population and weakening competitiveness.

Sources: Yle

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