Bank of Finland forecasts strong economic growth to continue in Finland

Erkki Liikanen

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According to the Bank of Finland's latest forecast, the outlook for the Finnish economy is good and the economy's long-term growth prospects are stable. The forecast indicates that the gross national product will grow at an annual rate of around three percent over the next few years, while in 2008 the growth will drop to 2.8 percent.
     
The excellent prospects are a reflection of the world economy's strong long-term growth prospects, notes Erkki Liikanen, Governor of the Bank of Finland.
      Even though the price of oil has increased, its effect on world economic growth and inflation has been lower than expected. The US economy has continued to display strong growth in 2006, and a pick-up in growth is expected also in the euro area in the course of the current year.
     
In recent years the growth-rate of the Finnish economy has been more than double compared with the rest of the eurozone. According to Liikanen, Finland's exports are to grow "quite substantially" over the next few years. Thanks to the favourable trade with Russia, Finland's exports are increasing more rapidly than those observed elsewhere in the euro area.
      Furthermore, Finnish consumer prices appear to grow very slowly. Hence the Bank of Finland's forecast suggests that during the next few years inflation should remain in check and below two percent, which is slower than elsewhere where the common currency is in use.
      On the other hand, according to the Eurostat statistics, Finnish labour costs have risen somewhat more rapidly than in the euro area on average.
     
Investments are expected to show a positive development in 2006, after some weak years.
      According to a recent investment inquiry, the technology industry's investments will grow by more than 10 percent compared with the previous year.
     
In the period from 2006 to 2008 Finland's financial state is expected to be stable.
      Furthermore, the Bank of Finland's forecast indicates that the rate of unemployment will drop to eight percent in the course of the current year, and will remain at 7.8 percent in 2007 and 2008.
      The good financial prospects for the next few years will be constrained by various shortages of resources, including the supply of qualified labour.
      Liikanen also pointed out that real interest rates are very low worldwide, and there are large amounts of savings available, while at the same time, the level of investments is low outside the United States.


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  Bank of Finland: Erkki Liikanen, Governor of the Bank of Finland - Strong economic growth to continue in Finland, with prices remaining in check

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