Sampo Bank forecasts continued unemployment growth

Slight recovery expected after summer low

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Following the lines of many economic forecasters, Sampo Bank sees signs of slow recovery in the world economy.
      However, the news is of little comfort to ordinary wage earners in Finland. The bank predicts that unemployment will continue to grow “sharply” for another two years.
      “For the average unemployment rate next year we predict 9.5 per cent”, the bank said in its forecast, which was published on Monday.
      This year’s average unemployment rate was estimated at 8.6 per cent.
     
Unemployment sparked by economic crises often grows for a long time after the worst impact on industrial production and corporate activities is past.
      Sampo calculates that Finnish GDP declined by 7-8 per cent in the first half of this year.
      According to the forecast there could be some recovery toward the end of the year from the summer’s low ebb, and the bank expects the total GDP balance for the year to be 5.5 per cent on the negative side. Next year the economy could grow by about one per cent.
     
Sampo Bank expects the state debt to grow fast, but believes that the ratio of public debt to GDP will remain below 50 per cent next year as well.
      Although this puts Finland in a better situation than the average for the euro zone, Finnish politicians will have their work cut out for them in keeping state spending under control.
      “Stimulus measures will leave great economic challenges for Finnish public finances. Cutting deficits will lead to a significantly tighter finance policy, which means that there is no going back to the rapid economic growth of the kind that took place in recent years”, says Sampo Bank head economist Lauri Uotila.
      The bank predicts that the debt level of Finnish households will remain at a tolerable level.


Previously in HS International Edition:
  No signs yet of economic upturn in Finland, despite positive glimmers in US (15.4.2009)
  Research institute offers grim economic forecast (4.2.2009)

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