Finance Ministry predicts improved employment, healthy growth this year
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The Ministry of Finance is predicting a good year ahead for Finland, with GDP growing at a rate of 3.7 percent.
The ministry's cyclical report, which was issued on Tuesday, predicted that the growth rate might be even faster in the early part of the year, slowing down in the second half.
All indicators are seen to point in the right direction: in addition to healthy, and broad-based economic growth, the international situation is good, thousands more jobs are being created, state finances are in surplus, and the state debt is declining.
With tax cuts adding to consumer demand, the stage is set for a very good economic year for Finland.
Employment is set to improve at the same rapid rate. Last year's figure of 50,000 new jobs is not expected to be duplicated, but job growth is nevertheless expected to reach 30,000 - an increase of 1.4 percent. Combined with last year's 50,000 new jobs, the employment level should rise to nearly 69 percent. At the same time, the unemployment rate is expected to fall to below eight percent.
Structural unemployment nevertheless remains a problem, and job creation appears to be very structural and regional. The paper and electronics industries are shedding jobs, sending many people to the unemployment lines. In other areas, at shipyards and in the metals industry, for instance, there is a slight labour shortage, which is expected to get worse.
The trend is likely to slow down in 2007, but the government's goal of 100,000 new jobs during the current parliamentary term appears to be close to becoming a reality.
State finances have long showed a surplus, which is expected to grow further this year. However, municipalities are having a more difficult time, with deficits and debts in many places.
Lower income taxes are encouraging spending, and the one percent rise in consumer prices is considerably less than in other parts of the euro zone. The rise in earnings is slowing down to 2.5 percent.
The housing market remains robust, even though both prices and home loan interest rates are on the rise.
Consumer consumption is rising so much that the Ministry of Finance is somewhat concerned about the increase in indebtedness. Hannu Jokinen, a top official at the Finance Ministry, sees indications of worse times to come.
"The good figures are obscuring a more negative trend. Investments in production have been meagre: paper factories are not getting new machines, forest and electronics industries are moving abroad, new jobs are being created, but growth will slow down, and the following years could be worse on a global scale", Jokinen says.
Growth next year is expected to slow down to 2.5 percent. A year later, this is expected to be closer to two percent.
Finance Minister Eero Heinäluoma (SDP) nevertheless said in Brussels on Tuesday that the economic slump that might loom next year can be avoided if employment continues to improve. Forecasts of slower growth are based on the idea that more people will be retiring, and the labour shortage will become an economic bottleneck.
"With respect to retirement, we have already had good results. We have been able to raise the average age when people retire by a couple of years. By continuing these actions, we can make our employment and growth figures much better than was predicted in medium-term forecasts", Heinäluoma said.
Helsingin Sanomat
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| 15.3.2006 - TODAY |
 Finance Ministry predicts improved employment, healthy growth this year |
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