Finance Ministry predicts strong economic growth for this year

Unemployment easing, investments growing, and inflation staying in check

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In a cyclical forecast issued on Thursday, the Ministry of Finance predicts a second consecutive good year for the Finnish economy. According to the survey, GDP should grow by 3.3% this year. Last year’s figure was 3.7%.
      Other indicators also suggest that Finland has taken care of its matters well. There are fewer jobless than the average for the euro-zone, and prices are rising more slowly than in Finland’s competitors.
      The Finance Ministry’s view of the state of the national economy has become clearly more positive. In September the ministry predicted a growth rate of 2.7% for this year, raising it to 2.8% in November.
      Finance Ministry official Eero Kallio attributes the autumn "pessimism" to expectations that economic development in the last months of 2004 would have been weak.
      "However, the third quarter of last year turned out to be quite strong, and the last quarter was also good. The second half of the year was much better than we had expected, for which reason the starting point for this year is much better", Kallio says.
     
Kallio adds that the high price of oil may have had an impact on the forecasts. "We imagined that it would have a greater impact than proved to be the case."
      However, the biggest difference between what was predicted and how things turned out was in investments. "We were quite cautious in this respect, because we imagined that the uncertainties would reduce the enthusiasm of companies to make investments, but this did not happen."
      The strong economic growth this year is expected to lead to the creation of new jobs, with employment figures rising above the average for the euro-zone.
      Finland’s relatively better figures can be ascribed to Germany’s poor performance, including its millions of jobless.
      The five percent rise in investments is seen to reflect optimism in the business community.
     
The Finance Ministry nevertheless sounds a warning on global hazards.
      "The phase of fastest growth has apparently been passed in the global economy, because the rise in the price of oil is weakening possibilities for consumption, and is bringing uncertainty to the private investment environment", the survey says.
      According to the forecast, the United States will tighten its monetary and financial policy to fix the deficits in public finance and the balance of trade, and in the euro-zone the limited domestic demand will keep growth prospects of production at a modest level. However, the economies of China and India will continue to show strong growth.


Links:
  Ministry of Finance: Economic Bulletin 1/2005

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