Economic Outlook

Transcription

1 Juha Kilponen Suomen Pankki Economic Outlook Euro & talous 10 December 2015 Julkinen 1

2 Economic situation for Finland continues to be difficult Economic growth in Finland will be among the weakest in the euro area in 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 Julkinen 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 Julkinen 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 Julkinen 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 Julkinen 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 Julkinen 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 Julkinen 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 Julkinen 8

9 Foreign trade and external balance Julkinen 9

10 The recovery of 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 Julkinen 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 Julkinen 11

12 Labour market Julkinen 13

13 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 Julkinen 14

14 Wages and prices Julkinen 15

15 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: Julkinen 16

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

17 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 Julkinen 18

18 Public finances Julkinen 19

19 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 Julkinen 20

20 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 Julkinen 21

21 Risks and alternative scenario Julkinen 22

22 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 Julkinen 23

23 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. Julkinen 24

24 Thank you Julkinen 25