Finland's economy will see modest growth over the next three years, according to a forecast published on Monday by the Finance Ministry, but weak employment and economic uncertainty will hamper the recovery from recession.
The ministry's report predicts that Finland’s gross domestic product (GDP) will grow by around 1.0 percent this year, by 1.4 percent next year and by 1.7 percent in 2027.
The figures are almost identical to those published by the ministry in June.
"Our view of Finland’s economy is pretty much the same as it was at the beginning of the year. We expect Finland's economy to recover, but there are many uncertainties," the ministry's Janne Huovari said at a press conference on Monday morning.
These uncertainties include Finland's high unemployment rate as well as concerns about the effects of the government's austerity measures, which has impacted consumer confidence and caused households to channel any additional income into savings rather than consumption.
"The Finnish economy is recovering from a prolonged recession, but it is taking a long time for public finances to climb out of a deep slump," the ministry's Director General Mikko Spolander said.
"If we could reach a consensus on goals for managing public finances and for putting general government debt on a sustainable declining trend, that would be a shared national achievement that future generations would thank us for," he added.
The ministry also noted that global economic uncertainty will have an effect on Finland's pace of growth, although there are some positive signs on the horizon too.
"Finnish export growth is being significantly hindered by US trade policy and the appreciation of the euro, but is being supported by the euro area recovery," the ministry said, adding further that investments are set to increase again after two years of decline.
Employment situation slow to recover
Although the Finnish economy has been slowly emerging from recession, the growth is yet to be reflected in the nation's employment figures.
Unemployment in Finland was the second highest in the EU during the summer, and the flood of applications for positions has led some employers to stop advertising vacancies.
However, the ministry predicts that unemployment will fall to nine percent next year and will continue to drop further as the economy recovers.
The report also noted that Finland's labour force has increased due to immigration and the government's policies aimed at stimulating employment.
"However, weak demand means that the growth in the labour force has so far mainly shown up as increased unemployment," the ministry said.
State debt ratio will stabilise, but only temporarily
Another area of concern for the Finnish government is the continued need to borrow money in order to balance the country's books.
Prime Minister Petteri Orpo's (NCP) administration said when it came into office that stabilising Finland's debt ratio was one of its main economic goals.
According to the ministry's outlook however, Finland's debt ratio is set to temporarily stabilise in 2027 before it immediately starts to rise again.
"Accelerating economic growth and the implementation of adjustment measures next year will improve general government finances, and the deficit will be 3.6 percent of GDP. The deficit will settle at 3.1 per cent of GDP in 2029," the ministry predicted.
Lower inflation and the impact of the government's austerity measures will keep expenditure in check, the report added, but the need to invest in defence will also increase sharply.
