The credit institution Hypo said Friday that the Finnish economy is growing faster than anticipated and forecast growth in 2017 coming in at three percent, up from 1.4 percent in 2016. The credit institution has predicted that GDP growth will reach two percent in 2018.
According to the housing financier economic growth this year is being driven by domestic consumption and investment. It noted that exports have also picked up, fuelled by growth in the international economy.
Hypo said that currently all sectors of the economy are showing signs of positivity, with a surge in construction leading the way.
Expanding global economy, easing unemployment
The financial institution said that global economic growth is one of the factors buttressing the Finnish economy. The global economy is now experiencing its eighth consecutive year of growth following the financial meltdown of 2008.
Another trend is urbanisation, which is readily visible in the numerous construction sites scattered across the country and growth in the service sector. Hypo attributed the performance of the national economy to high value-add service sectors. At the same time, less profitable service sectors have played a role in boosting employment.
Structural changes in the Finnish industrial sector are finally translating into an upswing that is seeing companies post improved performances, Hypo added.
The firm said that the projected three percent growth this year will reduce unemployment from its current level of close to nine percent. In the years ahead, it is forecasting that unemployment will fall to eight percent. However structural unemployment in Finland remains high at around eight percent and will put a brake in the rate of economic growth.
Exports thriving, workforce fettering growth
The Finnish export sector picked up speed at the beginning of this year, backed by more goods being sold abroad in particular. However the proportion of high technology goods remained minimal and exports leaned heavily on raw materials and intermediate products.
Russia has gone from accounting for more 10 percent of Finnish exports to less than five percent, but exports to the USA have filled the gap. Exports of services to the US have been especially active.
According to Hypo’s economic forecast, while Finnish GDP growth could reach three percent this year, the ageing labour force and modest productivity improvements will dampen the rate of growth, bringing it down to a steady one to two percent.