Juha Kilponen Suomen Pankki. Economic Outlook

Transcription

1 Juha Kilponen Suomen Pankki Economic Outlook

2 Economic situation for Finland continues to be difficult Economic growth in Finland slower than in the euro area during the forecast period Finland s export market dynamics weaker than previously forecast Productivity growth will remain very slow, with no improvement in competitiveness No significant correction in the general government balance Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 2

3 Growth will remain subdued Real GDP % change on previous year (right-hand scale) At reference year (2010) prices (left-hand scale) 220 EUR bn % 10 Real GDP, % December June 2014f: f: f: f: Sources: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi 3

4 Euro area growth broadly based - Finland will fall behind Real, GDP Finland Euro area Index, 1999Q1 = 100 Real GDP, % Finland (BoF) Euro area (ECB) 2014: f: f: f: Forecasts: Bank of Finland (Finland) and European Central Bank ( euro area). Sources: Statistics Finland, Eurostat, Bank of Finland and ECB Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 4

5 Frail growth dependent on domestic demand Contributions to growth, components of aggregate demand Net exports Private consumption 6 Public sector demand Inventory change and statistical discrepancies % points Private investment % change in GDP volume The chart is merely indicative. The GDP growth contribution of each demand item has been calculated on the basis of its volume growth and its value share in the previous year. The figures for are forecasts. Sources: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi 5

6 Real income growth will sustain consumption Household's disposable income, consumption and savings 6 Savings ratio Housholds' real disposable income* Real private consumption* % Real private consumption, % 4 December June : f: f: f: Households = households and non-profit institutions serving households. * % change from previous year Sources: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 6

7 Investment recovers slowly investment rate remains low Slight upturn of investments Private investment Private investment excl. housing construction Housing construction Index, 2000 = Sources: Statistics Finland and Bank of Finland. Private investment, % December June 2014: f: f: f: December 2015 bofbulletin.fi Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 7

8 What explains investment growth? 6 Financing Fiscal policy Domestic demand Monetary policy Foreign factors Price margins Productivity Other Private investement, % %, trend deviation Source: Bank of Finland calculations. Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 8

9 Foreign trade and external balance 9

10 The recovery in exports delayed Developments in Finnish exports, imports and export markets Exports Imports Export markets Index, 2007 = 100 Exports, % December June 2014: f: f: f: Source: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 10

11 Forest industry still one of the pillars of foreign trade Finland's trade balance by goods category EUR million per month Computers and electronic equipment Crude oil and natural gas Metallic minerals Machinery and equipment Basic metals and metal products Wood and paper products Refined oil products Foods Transport equipment Converted into 2014 euros using the GDP deflator; data-smoothing by the HP filter. Sources: Finnish Customs and calculations by the Bank of Finland. Other 10 December 2015 bofbulletin.fi 11

12 Also country-specific changes in trade account Trade balance by country EUR million per month United States United Kingdom Other Swedeni Netherlands Russia (Soviet Union) Germany (East and West) China Converted into 2014 euros using the GDP deflator; data-smoothing by the HP filter. Sources: Finnish Customs and calculations by the Bank of Finland. 10 December 2015 bofbulletin.fi 12

13 Labour market 14

14 Labour market decline bottomed out Unemployment and employed population, trend Number of employed (left-hand scale) Unemployment rate (right-hand scale) ,000 persons % 12 Unemployment rate, % December June 2014f: f: f: f: Sources: Statistics Finland and Bank of Finland Dec 2015 bofbulletin.fi 15

15 Wages and prices 16

16 Inflation sluggish Components of HICP inflation Foodstuffs Energy Services and industrial goods excl. energy Inflation Sources: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi HICP, % December June 2014: f: f: f:

17 Differences in Finnish and euro area inflation partly explained by increases in indirect taxation Direct effect of indirect taxes on consumer prices 4 Finland Euro area Cumulative effect of changes in taxation on consumer price index since 2005, % Source: European Central Bank. 10 Dec 2015 bofbulletin.fi Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 18

18 Slow growth in wages and labour productivity Productivity and wage developments Compensation per employee Unit labour costs Productivity per person employed Prosenttimuutos edellisestä vuodesta Sources: Statistics Finland and Bank of Finland. Compensation per employee and productivity, % Compensation per employee Productivity 2014: f: f: f: Dec 2015 bofbulletin.fi 19

19 Public finances 20

20 Public finances will barely improve 8 General government net lending Social security funds Central government and local government Total general government % of GDP Sources: Statistics Finland and Bank of Finland. 10 Dec 2015 bofbulletin.fi 21

21 Debt will continue to grow at a rapid pace debt ratio will exceed 68% General government debt and total tax ratio General government EDP debt (left-hand scale) Total tax ratio (right-hand scale) 80 % of GDP % 48 Debt ratio, % December June 2014: f: f: f: Sources: Statistics Finland, State Treasury and Bank of Finland Dec 2015 bofbulletin.fi 22

22 Risks and alternative scenario 23

23 Forecast risks more on the downside [-] Uncertainties in the global economy [+] Euro area demand may recover faster than expected [-] In the domestic economy, the main risks relate to economic policy and the labour market Alternative scenario: Finnish exports fall further behind export markets 24

24 Forecast summary Forecast summary Percentage change on previous year f 2016 f 2017 f f 2016f 2017f Gross domestic product Labour market Private consumption Hours worked Public consumption Total employment Private fixed investment Unemployment rate, % Public fixed investment Unit labour costs Exports Compensation per employee Imports Productivity Contributions to growth Domestic demand Gross domestic product deflator Net exports Private consumption deflator Inventory change + statistical discrepancy Household saving ratio, % Harmonised index of consumer prices Excluding energy Current account, % of GDP Energy f = forecast Sources: Statistics Finland and Bank of Finland. 25

25 What corrective measures are needed? Will they restore confidence? Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 26

26 We have to take determined, corrective economic policy measures Restoration of cost-competitiveness Structural changes Halt upward trend in public debt Economic recovery also supported by monetary policy At the same time, macroprudential policy must mitigate risks arising from protracted period of low interest rates Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 27

27 ECB monetary policy and Finland Accommodative monetary policy also supports the Finnish economy. The low level of interest rates has been transmitted to loan interest rates paid by households and non-financial corporations. Improved prospects for exports to euro area In the years to come, monetary policy will provide an effective stimulus to the economy, if 1. measures are implemented to correct current economic trends 2. and the stability of the banking system is safeguarded. In this event, accommodative monetary policy will boost investment. Juha Kilponen Suomen Pankki Finlands Bank Bank of Finland 28

28 Theme articles: Fiscal effects of immigration depend on labour market outcome (Vanhala-Eerola) A brief history of Finnish foreign trade (Itkonen) Assessment of public finances: upward trend in debt is disquieting (Kivistö) Finland is greying will the effectiveness of monetary policy diminish (Kilponen-Kinnunen-Mäki-Fränti) Finland, most expensive country in the euro area (Itkonen) Financial stability assessment 29

29 Thank you!