Research Institute ETLA: Wages will rise by 3.7 per cent in 2008

Global economy will continue to expand, Finnish economic growth will slow down

Pasi Sorjonen

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The Research Institute of the Finnish Economy (ETLA) anticipates that wages will rise by as much as 3.7 per cent in 2008, while this year the level of earnings is likely to increase just by 2.7 per cent.
      The current wage settlement will expire at the end of September, and owing to the strong economic growth of recent years, next autumn's collective wage negotiations may be difficult, predicts Pasi Sorjonen, the chief of forecasting at ETLA.
      "The figure for 2008 is just a forecast, not a recommendation for a wage hike", notes Sorjonen.
      According to Sorjonen, another reason for rising wages is a shortage of skilled labour in some industries. This will raise the level of earnings also in the public sector in the next few years.
      Following the increase in wages, consumer prices are anticipated to rise by 1.8 per cent in both years. At the same time, the Research Institute predicts that growth in private consumption will slow down and the number of unemployed persons will decrease more slowly.
     
On Wednesday, ETLA released its prognoses for 2007 and 2008, saying that the growth of the world economy is expected to remain strong in the forecast period while Finnish economic growth will slow down to close to the Eurozone average.
      Asia, led by China and India, continues to be the world economy's growth engine. China's influence on global trade will grow at an accelerating pace, with the US economy slowing down more than expected.
     
The rapid slowing of the US economy is posing a major threat to the anticipated favourable growth of the world economy, as it would weaken the export opportunities of countries in Europe and Asia.
      In developing countries, the breakneck growth rate could lead to some sort of crises, such as overheating, price bubbles, and shortages of resources.
      "Owing to globalisation, the strong growth of the world economy has continued since 2001. However, cyclical fluctuations have not ceased and globalisation is not a perpetual motion machine that can maintain strong growth forever", argues Pasi Sorjonen.
      As for Finland's economic prospects over the next few years, ETLA estimates the growth rate of GDP to decelerate significantly in the forecast period from last year, to 2.7 per cent this year and 2.8 per cent in 2008. Finland's economic growth will then depend largely on domestic demand rather than on the development of exports.
     
In addition to its economic prognosis, the research institute estimated further that the most important challenges during the term of the next government will be the ageing population and globalisation.
      ETLA is a Finnish think tank for economic and social studies, and is financed primarily by employers' organisations.


Links:
  The Research Institute of the Finnish Economy (ETLA)
  ETLA press release

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