Outlook for the Finnish economy

Transcription

1 Juha Kilponen Ennustepäällikkö, Suomen Pankki Outlook for the Finnish economy

2 Forecast comparison with the external environment Annual change, % Kesäkuu 216 Joulukuu Global GDP (excl. the euro area) 3,1 3,1 3,7 3,8 3,1 3,6 3,9 X Global trade (excl. the euro area),7 1,8 3,5 4,,5 2,9 3,8 X Export demand for the euro area,6 2, 3,5 4,,1 2,7 3,8 X Sources: ECB, BMPE projections.

3 The Finnish economy is returning to growth, supported by domestic demand GDP growth will be only around 1% in Inflation will be slow for a prolonged period. The labour market shows improvement, but the unemployment rate will remain high. Growth is dependent on consumption and investment export growth remains weak. Sluggishness in the industrial sector and rising debt levels cause concern about the sustainability of growth.

4 We are leaving behind a long recession % change on previous year (right-hand scale) At reference year (21) prices (left-hand scale) 22 EUR bn % 1 Real GDP, % 2 5 June December f f f Sources: Statistics Finland and Bank of Finland. 9 Jun 216 bofbulletin.fi 3_216

5 Growth strongly dependent on domestic demand Net exports Public sector demand Inventory change and statistical discrepancies Private consumption Private investment % change in GDP volume 5 % points 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. 9 Jun 216 bofbulletin.fi (e)

6 Balance of supply and demand % change on previous year e 217 e 218 e GDP Private consumption Public consumption Private fixed investment Public fixed investmentt Exports Imports Sources:B ank of Finland and Statistics of Finland

7 Increase in euro area exports, contraction in extra-euro area exports Exports of goods and services; volume 15 Total exports Euro area exports Extra-euro area exports 28= Sources: Bank of Finland calculations and Statistics Finland. 9 June 216 bofbulletin.fi 3277@@EX

8 Upward trend on the labour market Number of employed and unemployment rate Employed persons Unemployment rate f f f

9 Slower growth in unit labour costs Compensation per employee Unit labour costs Productivity per employed person % change on previous year Sources: Statistics Finland and Bank of Finland. Compensation per employee and productivity, % Compensation per employee Productivity f f f Jun 216 bofbulletin.fi 31717@E&T_3_216

10 Inflation slow for a prolonged period Price level in Finland relative to euro area Finnish inflation Euro area inflation 5 Inflation, % Difference in prices, % 24 HICP, % Finland Euro area 215,2, e,2, e,8 1, e 1, 1, Price index is based on household consumption expenditure. Sources: Eurostat and Bank of Finland. 3175@hintataso&inflaatio

11 5 Decline in household savings ratio Savings ratio, % 3-month Euribor, %

12 General government debt continues to grow debt ratio will exceed 7% % of GDP % Sources: Statistics Finland, State Treasury and Bank of Finland. 9 Jun 216 bofbulletin.fi 2493@E&T_3_216_velka_julkyht(en)

13 General government deficit will shrink no change in structural deficit 6 Local government Central government % of GDP Social security funds Total general government Sources: Statistics Finland and Bank of Finland. 9 Jun 216 bofbulletin.fi 2493@E&T_3_216_luotonanto

14 Current account remains in deficit Primary income and current transfers from abroad Services account Balance of trade Current account 12 % of GDP Source: Statistics Finland. 9 Jun 216 bofbulletin.fi 32344@E&T_3_216_Vaihtotase (en)

15 Risks to the forecast more balanced than before The international environment is still subject to negative risks, particularly for emerging economies. The political situation in the United States and the UK s EU referendum are also sources of uncertainty. The situation on the Swedish housing market is a risk to the Finnish financial system. The key domestic risks relate to the labour market situation, fiscal policies and progress with structural, reform and productivity developments.

16 Forecast summary f 217 f 218 f f 217 f 218 f Gross domestic product Labour market Private consumption Hours worked Public consumption Employed persons Private fixed investment Unemployment rate, % Public fixed investment Unit labour costs Exports Compensation per employee Imports Productivity Contribution to growth Domestic demand Gross domestic product, price deflator Net exports Private consumption deflator Inventory change + statistical discrepancy Savings ratio, households, % Harmonised index of consumer prices Current account, % of GDP Excl. energy Energy

17 Thank you!

18 Additional slides

19 A substantial increase in the employment rate would require much faster growth GDP stagnates in alternative scenario GDP Baseline Alternative scenario At reference year (21) prices, EUR million EUR 8 bn Source: Bank of Finland calculations. 9 June 216 bofbulletin.fi (e) Decomposition of shock contribution to private output growth Difference between alternative scenario and baseline forecast, Other Technology Domestic market competition Foreign countries Domestic demand Taxation Total.7 Percentage points Sources: Statistics Finland and calculations by the Bank of Finland.

20 Components of HICP Inflation 5 % Services and industrial goods excl. energy Energy products Foodstuffs Inflation 4 3 HICP, % June December f f f Sources: Statistics Finland and Bank of Finland. 9 June 216 bofbulletin.fi 3175@ET_216_3_YKHIennuste