ETLA sees no sign of investment-driven boom
Industry not investing in Finland
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The Research Institute of the Finnish Economy (ETLA) does not feel that a traditional investment-driven economic boom is on the horizon.
In a fresh survey, ETLA notes that industry is not making investments in Finland; the wood processing and electronics industries are mainly investing in other countries. According to Pasi Sorjonen, ETLA’s head of forecasts, the engineering and metals industries also do not seem to be making investments in Finland.
Economic upturns in Finland have traditionally been sparked by increased exports. This causes factories to run at full capacity, and encourages investments in more production capacity to meet the greater demand. Now it seems that industry does not want to invest in additional capacity in Finland.
The slow first half of this year has caused ETLA to downgrade its forecast for growth in exports to 2.5%. However, the institute expects that next year exports will increase by 4.5%.
Nevertheless, the recovery in export activities is not reflected in investments. Last year industrial investments in Finland declined.
ETLA expects fixed investments to increase by only about two percent this year. Most of the investments will involve home construction and large infrastructure projects, such as a new nuclear power plant, the construction of a large harbour in Vuosaari, in the east of Helsinki, and a few large highway construction projects. Investments in machinery and equipment are expected to decline.
Employment is generally connected with investments. According to ETLA, the lack of new investments means that the employment rate is unlikely to rise much.
Finnish economic growth is expected to be about three percent this year and next. However, the early part of the year has been so slow that reaching even this level would require a sharp increase in economic activity in the second half. The growth depends largely on domestic demand.
Economic growth is also increasingly dependent on private services. Industrial investments will increase only if new areas of growth emerge in Finland. However, no new Nokias are on the horizon.
ETLA’s remedies for the situation are hardly surprising: support for education and research, and the establishment of business-friendly conditions.
ETLA also calls for flexible markets, competitive taxation, and cost-efficient administrative systems.
Helsingin Sanomat
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| 4.6.2004 - TODAY |
 ETLA sees no sign of investment-driven boom |
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