Finland Country Risk Report Q4 2018
GDP growth will ease over the coming years, in line with a regional slowdown and structural constraints. Domestic demand will drive the expansion, while there will be headwinds from pre-election political uncertainty and threats to global trade from increase protectionism.
Recent above-trend growth has helped correct macroeconomic imbalances, but long-term sustainable growth hinges on the successful completion of reforms to enhance export competitiveness and to tackle the problems linked to a rapidly ageing population.
The government's flagship reform to healthcare, social services and regional governments faces more delays, reducing the likelihood that the package will be approved before the election due by Spring 2019. The setback could prompt early elections, though the broader impact would be greater uncertainty over the sustainability of public finances.
Major Forecast Changes
We have nudged up our short-term growth forecast for 2018 to 2.5%, from 2.3%, due to strong momentum at the start of the year and the announcement of new major investment projects.
A faster-than-expected deceleration in EU growth after Brexit would take a toll on European demand for Finnish exports, while US protectionist measures have increased risks to global trade.
Elevated household debt may prompt monetary authorities to impose new restrictions on bank lending, particularly for mortgages, curbing the growth in credit.
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