Finnish Economy Penna Urrila, Chief Economic Policy Adviser - - PowerPoint PPT Presentation

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Finnish Economy Penna Urrila, Chief Economic Policy Adviser - - PowerPoint PPT Presentation

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Finnish Economy Penna Urrila, Chief Economic Policy Adviser 13.5.2014 Main Topics Basic Facts about the Finnish economy Economic Situation in May 2014 - Global and European Outlook: Support for a small export-driven country? - Finland

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Finnish Economy

Penna Urrila, Chief Economic Policy Adviser 13.5.2014

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Main Topics

2

  • Basic Facts about the Finnish economy
  • Economic Situation in May 2014
  • Global and European Outlook: Support for a small export-driven country?
  • Finland and the Russian situation
  • Key forecast figures
  • Trade between Finland and Estonia
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Finnish Economy: basic facts

3

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10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100

Employment by Sector %

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2005 2010 2012 9.6 12.2 15.4 17.9 17.2 22 28.6 32 34.9 39 41.9 44.2 46.5 47.5 5.2 5.5 18.4 7.5 6 9.2 18.9 23 24.8 25.2 24.5 24.1 17.9 17.3 19.6 24 23.7 31.5 31.4 32.9 33.1 29.4 27.3 25.4 24.1 23.8 70.5 67.9 59.8 52.6 40.7 39 34 25.9 13.1 8.6 6 5.2 4.9 4.6 9.6 12.2 15.4 17.9 17.2 22 28.6 32 34.9 39 41.9 44.2 46.5 47.5 5.2 5.5 18.4 7.5 6 9.2 18.9 23 24.8 25.2 24.5 24.1 17.9 17.3 19.6 24 23.7 31.5 31.4 32.9 33.1 29.4 27.3 25.4 24.1 23.8 70.5 67.9 59.8 52.6 40.7 39 34 25.9 13.1 8.6 6 5.2 4.9 4.6

*Change in statistical standards in 1975

Primary production* Secondary production Public services* Private services Source: Statistics Finland

12.5.2014/raktal2/jka/EKI Talousgraafit

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10 20 30 40 50 60 70 80 90 100

Finnish Exports of Goods by Branch

1960 1980 1990 2000 2005 2010 2012

15 15 10 7 8 11 12 11 10 10 13 20 23 4 11 31 28 15 13 18 22 16 17 19 18 15 7 10 9 13 15 15 42 30 30 22 16 16 15 27 15 7 5 5 4 4

Wood and wood product Pulp, paper and paper products Metals and metal products Machinery, equipment and vehicles Electronics and electrotechnics Oil, chemicals and chemical products etc. Other products

In 1960 metals and metal products includes machinery and electronics etc.

Source: Board of Customs

12.5.2014/rakv ie3/jka/EKI Talousgraafit Share of Goods Exports, %

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10 20 30 40 50 60 70 80 90 100 10 20 30 40 50 60 70 80 90 100 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Finnish Exports of Goods and Services

Exports of Goods Exports of Services 12-Month Moving Sum, Bill. EUR

Source: Bank of Finland

12.5.2014/v ien10/jka/EKI Talousgraafit

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20 40 60 80 100 120 140 160 180 200 220 240 260 280

Gross Domestic Product Per Capita in EU Countries (+ISL NOR)

Bulgaria Romania Latvia Hungary Poland Estonia Greece Lithuania Portugal Slovakia Czech Republic Slovenia Cyprus Malta Spain Italy EU27 France United Kingdom Iceland Finland Belgium Germany Denmark Netherlands Sweden Ireland Austria Norway Luxembourg

GDP per capita 2013, PPS, EU27=100 Source: European Commission Forecast (11/2013)

5.11.2013/tal78/jka/EKI Talousgraafit

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50 60 70 80 90 100 110 120 130 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Finnish GDP, 2005=100

12.5.2014

Source: Eurostat

”Great Finnish Depression” 1990–1993 Cumulative GDP decrease > 12 % “Bad banking, bad policy, bad luck”

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90 100 110 120 130 140 150 160 170 180 190 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GDP volumes

Estonia Finland

12.5.2014 Index, 2000=100

Source: Eurostat

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2 4 6 8 10 12 14 16 18 20 22 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Unemployment rate, %

ä

Euro area Estonia Finland United States

12.5.2014

Source: Eurostat

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Finnish Exports of Goods by Country 2013 55.9 billion euro

Other countries 18.7 Turkey 1.2 Switzerland 1.3 Canada 1.3 Spain 1.4 South Korea 1.5 Japan 1.8 Denmark 1.9 Italy 2.3 Poland 2.4 Norway 2.9 Estonia 3.1 France 3.2 Belgium 3.4 China 4.9 UK 5.2 Netherlands 6.2 USA 6.4 Russia 9.6 Germany 9.7 Sweden 11.6 Source: Board of Customs

3.3.2014/rakvie4/jka/EKI Talousgraafit

Share of Goods Exports, %

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Finnish Imports of Goods by Country 2013 58,2 billion euro

Other countries 14.9 Tjeckien 1.1 Japan 1.1 Brazil 1.1 Switzerland 1.2 Spain 1.5 Norway 2.0 Belgium 2.1 Poland 2.3 Italy 2.6 Estonia 2.9 Denmark 3.1 United Kingdom 3.2 France 3.3 USA 3.4 Netherlands 5.8 China 6.3 Sweden 11.4 Germany 12.6 Russia 18.1 Source: Board of Customs

3.3.2014/raktuo1/jka/EKI Talousgraafit

Share of Goods Imports, %

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Public Finances

Credible in the short run, big challenges in the longer term

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  • 6
  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 5 6

Government Fiscal Position in 2014

Cyprus Spain United Kingdom Ireland Slovenia Portugal France Slovakia Hungary Austria Netherlands Italy EU27 Belgium Malta Finland Romania Lithuania Bulgaria Czech Republic Sweden Greece Denmark Latvia Estonia Luxembourg Germany Poland

Per cent of GDP Source: European Commission Forecast (05/2014)

6.5.2014/ennu6/jka/EKI Talousgraafit

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20 40 60 80 100 120 140 160 180 200

General Government Consolidated Gross Debt in 2014

Estonia Bulgaria Luxembourg Latvia Romania Sweden Lithuania Denmark Czech Republic Poland Slovakia Finland Malta Netherlands Germany Hungary Austria Slovenia EU27 United Kingdom France Spain Belgium Ireland Cyprus Portugal Italy Greece

Per cent of GDP Source: European Commission Forecast (5/2014)

9.5.2014/ennu7/jka/EKI Talousgraafit

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5 10 15 20 25 30 35 40 45 50

Total Tax Revenue by Country in 2014

Lithuania Latvia Romania Bulgaria Slovakia Ireland Estonia Poland Spain Portugal Malta Cyprus Greece Czech Republic United Kingdom Slovenia Luxembourg Hungary Germany EU27 Netherlands Italy Austria Sweden France Belgium Finland Denmark

Per cent of GDP Source: European Commission Forecast (5/2014)

9.5.2014/tal51/jka/EKI Talousgraafit

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1 2 3 4 5 6 7 8 08 09 10 11 12 13 14

Long Term Interest Rates, %

10 Year Govt Bond Market Rates Spain Italy Finland Germany

Source: Macrobond

9.5.2014/kork21/jka/EKI Talousgraafit

Best possible credit rating (AAA)

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Rapidly Ageing Population

pp.kk.vvvv Penna Urrila 18

10 20 30 40 50 60 70 80 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Elderly (>65yrs) / 100 persons in working age Children (<15yrs) / 100 persons in working age

Sustainability gap in Finnish public finances ~ 5 %/GDP (EUR 10 billion)

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Current Economic Situation:

Possibilities for an export-led growth in 2014?

19

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  • 50
  • 40
  • 30
  • 20
  • 10

10 20 30 40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Confidence Indicators in EU

Balance Industry Consumers

Services Business, service and consumer surveys Source: European Commission

9.5.2014/luot2/jka/EKI Talousgraafit

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60 70 80 90 100 110 120 130 140 150 160 170 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

New Orders in Finnish Manufacturing 2005=100

12.5.2014

Source: Statistics Finland

?

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Main Forecasts

2012 2013* 2014** 2015**

Change or level

GDP, % Industrial prod., % Private services, % Exports, % Imports, % Private consumption, % Private investment, % Inflation, % Unemployment rate, % Current balance/GDP, % EMU surplus/GDP, % EMU debt/GDP, %

  • 1,0
  • 1,4

0,7 2,0

  • 2,1
  • 2,7

2,6 4,4 4,3 1,3 1,0 3,0

  • 0,2

0,3 3,7 4,6

  • 0,7
  • 1,8

2,9 3,0 0,3

  • 0,8

0,4 1,3

  • 1,2
  • 6,4
  • 2,4

2,7 2,8 1,5 1,6 1,9 7,7 8,2 8,4 8,3

  • 1,4
  • 0,8
  • 0,1

1,2

  • 1,8
  • 2,0
  • 2,1
  • 1,2

53,6 56,9 59,6 60,5

Sources: Statistics Finland and ETLA (26.3.2014)

26.3.2014/ennu1/jka/EKI Talousgraafit

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Lähde:

Finland depends heavily on trade with Russia:

Russian final demand, % of total value added in exports

pp.kk.vvvv Penna Urrila 23

OECD

1 2 3 4 5 6 7 8

Malta Canada Luxembourg Australia India USA Portugal UK Ireland Spain Norway Japan Belgium France Switzerland South Korea Netherlands Denmark Sweden China Austria Brazil Germany Italy Greece Romania Czech Republic Slovakia Slovenia Hungary Bulgaria Poland Latvia Estonia Turkey Finland Lithuania

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Lähde:

Tuonti 1 686 milj. euroa

Mineraalien k aiv uutuotteet 0.1 % Muut tuotteet 24.4 % Sellu, paperi ja paperituotteet 0.8 % Elintarv ik k eet 7.3 % Koneet ja laitteet 7.9 % Metallit ja m etallituotteet 7.5 % Elek troniik k a- ja sähk ö 20.4 % Kem iantuotteet 4.8 % Kulk uneuv

  • t 12.1 %

Puutav ara ja puutuotteet 6.5 % TEVA 8.1 %

Vienti 1 745 milj. euroa

Mineraalien k aiv uutuotteet 0.3 % Kem iantuotteet 24.3 % Koneet ja laitteet 6.7 % Metallit ja m etallituotteet 10.2 % Elintarv ik k eet 7.5 % Puutav ara ja puutuotteet 2.4 % Muut tuotteet 16.0 % Sellu, paperi ja paperituotteet 3.6 % Kulk uneuv

  • t 13.0 %

TEVA 4.3 % Elek troniik k a- ja sähk ö 11.7 %

Lähde: Tullihallitus

jk a/12.5.2014

Finnish Trade with Estonia

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90 100 110 120 130 140 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Nominal Unit labour Costs

Finland Euro EU27 Sweden Germany Index, 2001=100, s.a.

Source: Eurostat

9.5.2014/yktk1/jka/EKI Talousgraafit

Cost competitiveness has worsened

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Lähde:

Finnish Cost Competitiveness: Relative unit labour costs compared with Germany

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0.90 ¡ 0.95 ¡ 1.00 ¡ 1.05 ¡ 1.10 ¡ 1.15 ¡ 1.20 ¡ 1.25 ¡ 1.30 ¡ 2000 ¡ 2001 ¡ 2002 ¡ 2003 ¡ 2004 ¡ 2005 ¡ 2006 ¡ 2007 ¡ 2008 ¡ 2009 ¡ 2010 ¡ 2011 ¡ 2012 ¡ 2013 ¡ 2014 ¡ 2015 ¡ Finland ¡ Germany ¡ Finland: ¡new ¡wage ¡ agreement ¡2014-­‑2016 ¡

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Finnish Macroeconomic Outlook: Conclusions

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  • Improving demand and confidence in Europe, Russia a big concern

– Potential for export-led growth in 2014. Consensus forecast around 0.5 % GDP increase, unemployment stabilising at 8–8,5 %. – Finland rather dependent on exports to Russia and Russian tourists

  • Finland still going through major structural changes

– Forest and electronics industries – Worsened cost competitiveness, current account deficit ⇒ But: competitiveness slowly improving (very moderate wage agreement => 2016) ⇒ Promising news about investment projects, start up companies playing an increasing role

  • Stable public finances in the short run, big challenges in medium &

long term (2020s)

– Triple-A rating but sustainability gap some 5 % of GDP because of ageing population

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Thank you!