Economy & Trade: current situation

Business expectations have not falteredAccording to the business trend survey for May published by the Confederation of Finnish Industries EK, business expectations have improved as expected. The confidence indicators have also continued to improve. These indicators reflect the trend for the next half year or so, i.e. to the end of 2011. The respondents have remained positive, and the crises in Japan and Libya do not seem to have dampened their outlook.

Consumers expectations are also positive, but there have been signs of nervousness. Expectations regarding the national economy and employment have varied the most, while other expectations have remained stable and positive.

The GDP trend indicator improved by no less than 8% over the previous year in February. Although Finland suffered worse than others during the financial crisis, economic growth is now continuing at the same pace as the strongest EU economies. It appears that GDP will grow by at least the 4% forecast by the Research Institute of the Finnish Economy (ETLA).

The growth in the volume index for industrial output has slightly decelerated. A drop can also be seen in the development of wholesale trade, but this appears to be a random variation. Retail sales are beginning to exceed the pre-financial crisis levels. Wholesale is still about 10% below the peak level, and growth is still not very fast. Otherwise, the service sector is generally on the rise.

Exports of goods increased by 16% in 2010, and the pace of growth has continued to accelerate in the start of the year. Exports have increased by tens of percent in nearly all industries. However, exports by the electronics industry decreased by 14% last year. Exports by country have also increased steadily. Even though exports to China have increased since the early 1990s, they still managed to increase by almost a half last year. China already accounts for 5% of Finnish exports, making it Finland’s fifth biggest export market along with Great Britain.

In its March forecast ETLA forecasts the unemployment rate to fall to as low as 5.6% in 2013. GDP is expected to grow by 4% in 2011 and 3% in 2012. Total industrial production is expected to increase by approximately 8% this year and 6% next year. The government debt to GDP ratio is expected to rise to 51 per cent, but the general government deficit (EMU definition) should be zero already next year. The inflation forecast for 2011 is 3.5% and 2.9% for 2012.