outlook for the finnish economy 2016-2018
TRANSCRIPT
Julkinen
Ennustepäällikkö, Suomen Pankki
Outlook for the Finnish economy 2016-2018
9.6.2016
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Forecast comparison with the external environment
9.6.2016 Juha Kilponen
Sources: ECB, BMPE projections.
Annual change, % Kesäkuu 2016 Joulukuu 20152015 2016 2017 2018 2015 2016 2017 2018
Global GDP(excl. the euro area) 3,1 3,1 3,7 3,8 3,1 3,6 3,9 X
Global trade(excl. the euro area) 0,7 1,8 3,5 4,0 0,5 2,9 3,8 X
Export demand for the euro area 0,6 2,0 3,5 4,0 –0,1 2,7 3,8 X
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
The Finnish economy is returning to growth, supported by domestic demand
GDP growth will be only around 1% in 2016–2018.
Inflation will be slow for a prolonged period.
The labour market shows improvement, but the unemployment rate will remain high.
Growth is dependent on consumption and investment – export growth remains weak.
Sluggishness in the industrial sector and rising debt levels cause concern about the sustainability of growth.
9.6.2016 Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
We are leaving behind a long recession
9.6.2016 Juha Kilponen
Real GDP, %
June December
2015 0.5 -0.1
2016f 1.1 0.7
2017f 1.1 1.0
2018f 1.0
-10
-5
0
5
10
140
160
180
200
220
2000 2005 2010 2015
% change on previous year (right-hand scale)
At reference year (2010) prices (left-hand scale)
EUR bn %
Sources: Statistics Finland and Bank of Finland.
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Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Growth strongly dependent on domestic demand
9.6.2016 Juha Kilponen
-10
-5
0
5
2008 2010 2012 2014 2016 2018
Net exports Private consumption
Public sector demand Private investment
Inventory change and statistical discrepancies
% change in GDP volume
% points
The chart is merely indicative. The GDP growth contribution of each demanditem has been calculated on the basis of its volume growth and its value share in the previous year. The figures for 2016–2018 are forecasts.Sources: Statistics Finland and Bank of Finland.
9 Jun 2016bofbulletin.fi20756 @Kontribuutio (e)
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Balance of supply and demand
9.6.2016 Juha Kilponen
% change on previous year 2015 2016e 2017e 2018e
GDP 0.5 1.1 1.1 1Private consumption 1.4 1.6 0.6 0.7Public consumption -0.9 0.6 0.3 0.2Private fixed investment -1.0 4.7 3.6 2.6
Public fixed investmentt -1.2 2.3 1.6 -0.5Exports 0.6 0.7 2.4 2.5Imports -0.4 2.7 2.5 2
Sources:B ank of Finland and Statistics of Finland
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Increase in euro area exports, contraction in extra-euro area exports
9.6.2016 Juha Kilponen
60
65
70
75
80
85
90
95
100
105
2008 2010 2012 2014 2016 2018
Total exports Euro area exports Extra-euro area exports2008=100
Sources: Bank of Finland calculations and Statistics Finland.9 June 2016bofbulletin.fi32707@@EX
Exports of goods and services; volume
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Upward trend on the labour market
9.6.2016 Juha Kilponen
Number of employed andunemployment rate
Employedpersons
Unemploymentrate
2015 2437 9.4
2016f 2447 9.2
2017f 2463 9.0
2018f 2477 8.9
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Slower growth in unit labour costs
9.6.2016 Juha Kilponen
Compensation per employee andproductivity, %
Compensationper employee Productivity
2015 1.6 1.02016f 1.2 0.72017f 0.9 0.42018f 1.3 0.5
-6
-4
-2
0
2
4
6
8
10
2005 2010 2015
Compensation per employeeUnit labour costsProductivity per employed person
Sources: Statistics Finland and Bank of Finland.
9 Jun 2016bofbulletin.fi31717@E&T_3_2016
% change on previous year
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Inflation slow for a prolonged period
9.6.2016 Juha Kilponen
HICP, %
Finland Euro area
2015 –0,2 0,0
2016e 0,2 0,2
2017e 0,8 1,3
2018e 1,0 1,6
0
4
8
12
16
20
24
–1
0
1
2
3
4
5
2003 2005 2007 2009 2011 2013 2015 2017
Price level in Finland relative to euro areaFinnish inflationEuro area inflation
Inflation, % Difference in prices, %
Price index is based on household consumption expenditure.Sources: Eurostat and Bank of Finland.31705@hintataso&inflaatio
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Decline in household savings ratio
9.6.2016 Juha Kilponen
-2
-1
0
1
2
3
4
5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Savings ratio, % 3-month Euribor, %
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
General government debt continues to grow – debt ratio will exceed 70%
9.6.2016 Juha Kilponen
34.0 32.7
41.747.1 48.5
52.9 55.459.0
62.566.0 68.4 70.2
0
20
40
60
80
2007 2009 2011 2013 2015 2017
% of GDP
Sources: Statistics Finland, State Treasury and Bank of Finland.
%
9 Jun 2016bofbulletin.fi24903@E&T_3_2016_velka_julkyht(en)
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
General government deficit will shrink –no change in structural deficit
9.6.2016 Juha Kilponen
-6
-4
-2
0
2
4
6
2007 2009 2011 2013 2015 2017
Local government Social security fundsCentral government Total general government
Sources: Statistics Finland and Bank of Finland.
% of GDP
9 Jun 2016bofbulletin.fi24903@E&T_3_2016_luotonanto
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Current account remains in deficit
9.6.2016 Juha Kilponen
-4
-2
0
2
4
6
8
10
12
2000 2005 2010 2015
Primary income and current transfers from abroadServices accountBalance of tradeCurrent account
% of GDP
Source: Statistics Finland. 9 Jun 2016bofbulletin.fi32344@E&T_3_2016_Vaihtotase (en)
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Risks to the forecast more balanced than before
The international environment is still subject to negative risks, particularly for emerging economies.
The political situation in the United States and the UK’s EU referendum are also sources of uncertainty.
The situation on the Swedish housing market is a risk to the Finnish financial system.
The key domestic risks relate to the labour market situation, fiscal policies and progress with structural, reform and productivity developments.
9.6.2016 Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Forecast summary
9.6.2016 Juha Kilponen
2015 2016f 2017f 2018f 2015 2016f 2017f 2018f
Gross domestic product 0.5 1.1 1.1 1.0 Labour market
Private consumption 1.4 1.6 0.6 0.7 Hours worked -0.1 0.6 0.8 0.5
Public consumption -0.9 0.6 0.3 0.2 Employed persons -0.4 0.4 0.7 0.6Private fixed investment -1.0 4.7 3.6 2.6 Unemployment rate, % 9.4 9.2 9.0 8.9
Public fixed investment -1.2 2.3 1.6 -0.5 Unit labour costs 0.7 0.5 0.6 0.8Exports 0.6 0.7 2.4 2.5 Compensation per employee 1.6 1.2 0.9 1.3Imports -0.4 2.7 2.5 2.0 Productivity 1.0 0.7 0.4 0.5
Contribution to growth
Domestic demand 0.4 1.9 1.1 0.9 Gross domestic product, price deflator 0.4 0.1 0.7 1.0
Net exports 0.4 -0.7 -0.1 0.2 Private consumption deflator 0.2 0.4 0.6 0.8
Inventory change + statistical discrepancy -0.2 0.0 0.0 0.0
Savings ratio,households, % -0.6 -0.8 -0.7 -0.3 Harmonised index of
consumer prices -0.2 0.2 0.8 1.0
Current account, % ofGDP 0.1 -0.6 -0.8 -0.7 Excl. energy
Energy0.3-6.0
0.6-4.4
0.63.2
0.92.8
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Thank you!
9.6.2016 Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Additional slides9.6.2016 Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
A substantial increase in the employment rate would require much faster growth
9.6.2016 Juha Kilponen
EUR 8 bn
175 000
180 000
185 000
190 000
195 000
200 000
205 000
210 000
2015 2016 2017 2018 2019
GDP Baseline Alternative scenario
GDP stagnates in alternative scenario
At reference year (2010) prices, EUR million
Source: Bank of Finland calculations.
9 June 2016bofbulletin.fi32365 @BKT (e)
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2015 2016 2017 2018 2019
Other TechnologyDomestic market competition Foreign countriesDomestic demand TaxationTotal
Decomposition of shock contribution to private output growth
Percentage points
Sources: Statistics Finland and calculations by the Bank of Finland.
Difference between alternative scenario and baseline forecast,
Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Components of HICP Inflation
9.6.2016 Juha Kilponen
HICP, %
June December
2015 -0.2 -0.1
2016f 0.2 0.3
2017f 0.8 1.0
2018f 1.0-2
-1
0
1
2
3
4
5
2008 2010 2012 2014 2016 2018
Services and industrial goods excl. energyEnergy productsFoodstuffsInflation
%
Sources: Statistics Finland and Bank of Finland.
31705@ET_2016_3_YKHIennuste
9 June 2016bofbulletin.fi