Labour dispute of paper industry to have small effect on economic growth

Production stoppage of over one month would weigh growth rates

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Finnish economists are forecasting that the economic impact of the current labour dispute in the pulp and paper industry will be small and temporary.
      However, if the period of strikes and lockouts drags on to one or two months, it may lead to downward revisions in forecasted GDP growth rates of some tenths of a percentage point.
      According to outlooks published so far, the Finnish economy will grow by at least three percent in 2005. Industrial action closed pulp mills on Sunday night, and paper plants on Monday. On Wednesday, the strike changed into a lockout, which can last until mid-June.
     
Ritva Toivonen, research director of forest economics at the Pellervo Economic Research Institute, explains that the immediate effects of the labour dispute will first be felt in the pulp and paper industry, but repercussions will be witnessed within a couple of weeks in logging, or at sawmills and in other arms of the forest industry.
      "Roughly speaking, the effect of a strike or lockout of one week could be 0.1 percentage points off GDP growth", Toivonen calculates.
      Chief economist Jarkko Soikkeli from the Federation of Finnish Enterprises believes that if the labour dispute lasts for one month, it will cut around half a percentage point from the GDP growth rate.
      If the lockout turns out to be lengthy and supportive action spreads to other industries as well, Soikkeli says it could affect employment. For example, transportation firms could suffer from the loss of deliveries.
     
According to Pasi Sorjonen, the head of forecasting at the Research Institute of the Finnish Economy, the current economic outlook is a question mark because no one can predict the duration of the labour dispute.
      "The growth rate of the international economy was weaker than expected in the early part of the year, so there is cause to revise forecasts downwards."
      Research professor Jaakko Kiander from the Government Institute for Economic Research maintains that a strike or lockout lasting a couple of weeks will not significantly affect GDP growth rates. According to Kiander, the strike and lockout can also have positive effects if the price of paper rises.


Previously in HS International Edition:
  Paper lockout begins - shortage of products feared in coming weeks (19.5.2005)
  Long lockout in Finland would put upward pressure on paper prices (18.5.2005)

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