Economic Survey Autumn 2012
|ISBN-13:||978- 952-251-394-6|| |
|Julkaisusarja ja -numero:||Ministry of Finance publications 29c/2012|| |
|Saatavuus:||Juvenes Print|| |
|Tekijät:||Economics Department|| |
ἀe Ministry of Finance’s forecast assumes that there will be no drastic changes in the current structure of the euro area. However, as recent events have shown, the situation has become more serious over time and the possibility of an es-calating crisis within the currency zone cannot be ruled out. Indeed the forecast also includes the assumption that the problems in the euro area will persist throughout the outlook period. At the same time economic growth in Finland is probably on a prolonged sluggish path as the working-age population has begun to shrink and the investment rate seems to have dropped permanently, too.Uncertainty about where the economy is heading has remained high since the latter half of 2011. ἀis is channelled into the Finnish economy via various routes. ἀe growth of uncertainty is particularly reᴀected in private investment. Sluggish demand especially in the euro area will lead to a slight downturn in exports. ἀe GDP growth projection for the current year is 1%, and this growth will depend entirely on domestic demand. ἀe situation in the labour market is surprisingly strong in view of the broader economic environment: the unemployment rate is edging down and the pre-dicted annual average is 7.6%.ἀe GDP growth projection for 2013 is unchanged at 1%, but this growth will have a more diversiḀed structure. Private consumption will remain the most important driver of growth, but it is predicted that exports will return to a slow growth track. Historically modest output levels will not be enough to maintain employment growth, and unem-ployment will start rising. In 2014 economic activity is expected to grow by 2%.ἀe Government’s budget proposal for 2013 shows a deḀcit of EUR 7.0 billion. Even Ḁscal adjustment will reduce the central government deḀcit in 2013 and throughout the outlook period, the Government Programme target will be exceeded. However it is expected that the growth of the central government debt-to-GDP ratio will level out. Population ageing and the related increase in demand for social and health care services and the cutbacks in central government transfers to local government are weighing down on local government Ḁnances, and the local government budgetary position looks set to remain Ḁrmly in deḀcit as well. ἀe increase in earnings-related pension contributions and the pre-funding of revenue from these contributions will maintain the surplus in social security funds ἀe predicted rate of economic growth and the adjustment measures adopted by the Government will not be enough to close the sustainability gap in public Ḁnances. ἀe general government surplus should stand at around 4% of GDP in 2016 for government to be in the position to fulḀl its obligations in the long term. It is not appropriate to try to close the sustainability gap solely by immediate measures designed to increase taxes and cut expenditures. In order to improve the prospects for economic growth and secure the funding of the welfare state, immediate Ḁscal adjustment must be backed up reforms to economic structures.