Nordea’s Economic Outlook, which was published on Wednesday, makes for grim reading for the government, for companies and for consumers in Finland.
The bank says that Finland’s economic growth last year was based on consumption rather than exports, and that attempts at structural reform have so far failed and therefore an economic revival based on exports is unlikely.
Prime Minister Juha Sipilä had launched a so-called ‘social contract’ to try and remedy Finland’s competitiveness problem, but that is insufficient, according to Nordea’s chief economist Aki Kangasharju.
"There’s no sense in hankering after leaving the euro either, because the long resignation process brings uncertainty," said Kangasharju. "A better option is to continue reforms as a euro member despite all the difficulties."
Finland saw economic growth of 0.5 percent last year to emerge from several years of a contracting economy, but Nordea reckons that was down to private households’ consumption—and there’ll be similarly slim growth in 2016.
Several banks offered mortgage customers a break from repaying their loans at no cost, with OP justifying the move by explicitly citing the possible stimulus to the economy. Those offers are no longer available, and there’s no other boost to spending power in the offing.
The bank is therefore forecasting growth of just 0.5 percent this year and less than a percentage point in 2017. Kangasharju says that Finland can expect more cuts in public spending this year.
"Because the older cuts have not been made, and last year’s growth was slower than the Finance Ministry forecast, we can’t avoid additional cuts this year," said Kangasharju.