Finland’s economy needs to grow 3 per cent a year between 2018 and 2023 to catch up with the rest of the euro area

Announcement
Technology industry continues to enjoy a strong cyclical position and the turnover of technology industry companies is expected to be higher in the spring and summer of 2018 than in the corresponding period last year. However, there are indications that the pace of turnover growth is slowing down. Finland’s economy would need to expand at a rate of 3 per cent per year until the end of the next parliamentary term to catch up with the rest of the euro area.

According to the Federation of Finnish Technology Industries’ recent survey of order books, both new orders and order books remained at a high level in early 2018. However, significant quarterly variations have occurred in recent times, mostly due to large ship orders and new long-term service contracts...,.-

The technology industry companies that took part in the survey reported that the monetary value of new orders between January and March was 20 per cent lower than in the preceding quarter, but 17 per cent higher than in the corresponding period in 2017. Of the respondents, 54 per cent reported that the number of new orders was up since the October-December period, 38 per cent said it was down and 8 per cent said it had remained stable.

At the end of March, the value of order books was 1 per cent higher than at the end of December, and 24 per cent higher than in March 2017. Fifty-nine per cent of companies reported an increase in the number of orders from December, while 31 per cent reported a drop and 10 per cent had seen no change.

Personnel in Finland breaks the 300,000 mark

At the end of March, technology industry employed some 302,000 people, up 5,000 from the 2017 average. While most companies hired more employees or saw no change in personnel numbers, some had to let people go.

“Overall, the situation is good at the moment, but companies’ growth prospects are overshadowed by expanding labour shortages, global economic uncertainty and the production capacity reduction that has taken place since the economic crisis. We should also pay attention to the fact that despite the strong expansion of the global economy, recent euro area business cycle indicators have been sending worrying signals,” says Jorma Turunen, CEO of the Federation of Finnish Technology Industries. 

“We must do everything we can to maintain growth. The Federation of Finnish Technology Industries is currently finalising its suggestions for the next parliamentary term. Obviously, education and expertise as well as investment in research, development and innovation will have key roles. The objectives for education and expertise will be published on 3 May.”

Strong growth required to catch up with the rest of the euro area

The Federation’s Chief Economist Jukka Palokangas calculates that the Finnish economy would need to expand at a rate of 3 per cent per year until the end of the next parliamentary term to catch up with the rate of recovery in the rest of the euro area. His calculation is based on the IMF’s forecast of economic growth in the euro area.

“Finland trails behind across all key economic indicators. For example, manufacturing productivity development in Finland has fallen 25 per cent behind the EU average during the past decade, while Finland’s GDP trails 6 per cent behind the EU average. Accelerating economic growth as well as investment and productivity should become an imperative of economic policy in Finland. This did produced results after the depression in the 1990s,” Palokangas points out.

According to Palokangas, it would be commendable to put a stop to the increase of public debt in the near future. This does not get the problem off the table, however, as debt reduction will become more challenging over the coming years as a result of higher interest rates or, in case of an economic downturn, reduced tax intake. Improved productivity and economic growth are the only sustainable means to maintain Finnish economy and well-being of citizens.

Economic outlook 2/2018

Further information:

Eeva-Liisa Inkeroinen, Executive Vice President, tel. +358 40 089 4220

Jukka Palokangas, Chief Economist, phone +358 (0)40 750 5469