Finland: Investment declines
Economic activity has slowed substantially, mainly due to a decline in investment. Output growth is projected to be subdued in 2009, before recovering during 2010. Unemployment is likely to drift up during 2009, but should stabilise in 2010. Lower commodity prices and growing slack in the economy should bring down inflation from the current high rate.
The strong fiscal position provides room for fiscal manoeuvre. While the fiscal surplus is likely to fall considerably during 2009, due to weaker activity and sizeable tax cuts, it should remain close to 3% of GDP in 2010, as the recovery takes hold. Labour market mismatches need to be addressed to ensure a further decline in structural unemployment. The closing of the remaining early retirement schemes would raise employment and underpin fiscal sustainability over the medium term.