1. No category

Juha Kilponen
Head of Forecasting Division, Bank of Finland
Outlook for the Finnish
economy 2016 - 2019
Unrestricted
Global growth slightly slower
Annual change, %
June 2016
December 2016
2016 2017 2018 2019 2016 2017 2018 2019
Global GDP (excl. euro
area)
3.1
3.7
3.8
-
3.0
3.5
3.7
3.8
Global trade (excl. euro
area)
1.8
3.5
4.0
-
0.9
2.8
3.7
3.8
Euro area export
demand
2.0
3.5
4.0
-
1.5
2.5
3.4
3.6
Source: ECB, BMPE projections.
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
The global economic situation contributes to
the weakening outlook for the Finnish
economy
 All other things being equal, the situation in
the global economy would
– Slow GDP growth by 0.2%
– Cause export growth to decelerate by almost 1%
 Geopolitical factors pose a downside risk to
the forecast
 Uncertainty exceptionally high
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
BUT
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Positive news from the domestic
economy
Macroeconomic confidence Indicator
Growth threshold and 90% confidence interval
130
 The labour market has
strengthened
Indicator
120
110
 The downtrend in industrial
100
output has bottomed out
90
80
 Competitiveness Pact
70
60
2011
2012
2013
2014
2015
2016
Sources: European Commission and calculations by the Bank of Finland.
improving competitiveness,
monetary policy supporting
growth
30384@Koko talouden luottamus (EN)
 Confidence in the
economy has improved
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Long recession receding
GDP volume
% change on previous year (right-hand scale)
At reference year (2010) prices (left-hand scale)
220
%
EUR billion
200
10
GDP, %
June
Dec.
2016f
1.1
1.0
2017f
1.1
1.3
2018f
1.0
1.2
5
180
0
160
-5
140
-10
2000
2005
2010
2019f
1.2
2015
Sources: Statistics Finland and Bank of Finland.
13 Dec 2016
bofbulletin.fi
24078 @E&T 5_2016
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Balance of supply and demand
2016f
2017f
2018f
2019f
GDP
1.1
1.3
1.2
1.2
Private consumption
1.9
1.4
1.0
0.9
Public consumption
0.3
0.3
0.3
-0.3
Private fixed investment
5.8
3.4
2.5
2.7
Public fixed investment
3.1
0.6
-0.2
–0.1
Exports
0.7
2.1
2.5
2.6
Imports
1.2
2.0
2.1
1.9
% change on previous year
Sources: Statistics Finland and Bank of Finland.
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Recovery in investment raises
investment ratio
Corporate fixed investment, % of GDP
Residential construction investment, % of GDP
Average 1990–2008
%
25
20
15
10
5
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Statistics Finland.
Dec 13 2016
bofbulletin.fi
33987@Kuvio1
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Pace of export growth determined
primarily by euro area
Exports to euro area
Exports to outside euro area
Exports
Annual change, %
7
6
5
4
3
2
1
0
-1
-2
-3
2010
2012
2014
2016
2018
Sources: Statistics Finland and Bank of Finland.
13 Dec 2016
bofbulletin.fi
34002@x ja m kontribuutio
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Current account remains in deficit
Current account in deficit
Primary income and current transfers from abroad
Services account
Balance of trade
Current account
12
% of GDP
10
8
6
4
2
0
-2
-4
2000
2005
2010
2015
Source: Statistics Finland.
13 Dec 2016
bofbulletin.fi
32344@E&T_3_2016_Vaihtotase (en)
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Labour market strengthens
Trends for employment and the unemployment rate
2550
Number of employed, trend
Number of employed, Bank of Finland forecas, December 2016
Unemployment rate, trend
Unemployment rate, Bank of Finland forecast, December 2016
1,000 persons
2500
%
Number of employed and
unemployment rate
11
10
2450
9
2400
8
2350
7
2300
2010
6
2011
2012
2013
2014
2015
2016
2017
2018
2019
Employment
rate, %
Unemployment
rate
%
2016f
68.6
8.8
2017f
69.1
8.5
2018f
69.7
8.3
2019f
70.2
8.2
Sources: Statistics Finland and Bank of Finland.
13.12.2016
eurojatalous.fi
26516@Työlliset&työttöm.aste_trendi
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Long-term unemployment has risen to
very high levels
Proportion of the total number of unemployed people
who are long-term unemployed
%
40
35
30
25
20
15
10
2010
2011
2012
2013
2014
2015
2016
Source: Ministry of Economic Affairs and Employment.
12-month moving average.
32220@LTUosuus
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Growth sustained by consumers
Savings
8
inflation
Nominal income
Consumption
%
6
4
2
0
-2
-4
-6
-8
2007
Source: Statistics Finland.
2012
2017
13 Dec 2016
bofbulletin.fi
32698@ET_3_2016_Kuvio1(e)
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Wages and prices rising slowly
HICP, productivity and unit labour costs
Productivity per employed person
Unit labour costs, at market price
HICP
4,00
Wages and prices, %
3,00
Wages
2,00
HICPI
2016f
1.1
0.4
2017e
-0,5
0.8
-1,00
2018f
0.6
0.8
-2,00
2019f
1.0
1.0
1,00
0,00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-3,00
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Inflation slower than euro area
Price level in Finland relative to euro area
Finnish inflation
Euro area inflation
Difference in prices, %
5 Inflation, %
24
4
20
3
16
2
HICP, %
Finland
Euro
area
2016f
0.4
0.2
12
2017f
0.8
1.3
1
8
2018f
0.8
1.5
0
4
2019f
1.0
1.7
–1
0
2004
2009
2014
2019
Price index is based on household consumption expenditure.
Sources: Eurostat and Bank of Finland.
31705@hintataso&inflaatio
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Weakening of general government
budget balance comes to a halt
Factors affecting the general government budget
balance
1,2
Cyclical factors
Taxes and social security contributions
Other revenue
% points
Interest expenditure
Primary expenditure, total
Change in structural balance
General government
net lending, %
1,0
0,8
0,6
0,4
EUR
bn
% of
GDP
0,2
2016f
- 5.3
-2.5
0,0
2017f
- 5.7
-2.7
-0,2
2018f
- 5.3
-2.1
-0,4
2019f
- 4.9
-1.7
-0,6
2015
2016
2017
2018
2019
2016-19
Sources: Statistics Finland and calculations by the Bank of Finland.
13.12.2016
eurojatalous.fi
34003@Kuvio1
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
General government debt ratio
will exceed 70%
General government debt
74
% of GDP
71,3
72
70,1
70
68,2
68
65,6
66
63,6
64
62
60,2
60
58
56
54
2014
2015
Source: Statistics Finland.
f2016
f2017
f2018
f2019
13 Dec 2016
bofbulletin.fi
34005@Chart4
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Risks to the forecast on the downside
 Uncertainty in the global economy has reached
exceptionally high levels
– Impacts of Brexit ?
– Future US economic policy ?
 Sensitivity of the housing market to business cycle
and the impact of the competitiveness pact (+, -)
 Alternative scenario assesses effects if global growth
declines by half
– GDP would remain cumulatively 1.2% lower
– The need for fiscal consolidation would increase further
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Thank you!
www.bof.fi
www.eurojatalous.fi
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Additional slides
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Growth supported particularly by
domestic demand
Contribution of different demand components to
GDP growth
5
Net exports
Private consumption
Public sector demand
Private investment
Inventory change and
statistical discrepancies
% change in GDP volume
% points
0
-5
-10
2008
2010
2012
2014
2016
2018
The chart is merely indicative. The GDP growth contribution of each demand component
has been calculated on the basis of its volume growth and its value share in the
previous year. The figures for 2016–2019 are forecasts.
Sources: Statistics Finland and Bank of Finland.
13 Dec 2016
bofbulletin.fi
20756 @Kontribuutio
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted
Alternative scenario
Change in GDP relative to baseline scenario
0,2
Weaker export demand
% points
Change in debt ratio relative to baseline scenario
Tighter fiscal policy
Weaker export demand
Tighter fiscal policy
0,8 % points
0,0
0,6
–0,2
0,4
–0,4
–0,6
0,2
–0,8
0,0
–1,0
2017
2018
2019
–0,2
2017
Source: Bank of Finland calculations.
13 Dec 2016
bofbulletin.fi
2018
2019
Source: Bank of Finland calculations.
13.12.2016
eurojatalous.fi
32720@BKT_mw_fipo
32720@Velkasuhde_mw_fipo
Juha Kilponen
Suomen Pankki – Finlands Bank – Bank of Finland
Unrestricted