Finland

Politics:

• Analysis

  Finland politics: Centralised wage agreement talks break down

  The breakdown in centralised wage agreement talks between trade unions and employers on March 20th threatens to destabilise government efforts to re-energise a sluggish economy. The collapse means that separate collective bargaining rounds will take place in various industries on a sector-by-sector basis unless both sides can find enough common ground to resume talks. The government's decision to opt for a relaxation of its fiscal targets, rather than back fresh austerity measures from 2014 onwards, failed to impress unions, which expect an accelerated rise in unemployment as more large corporations lay off staff to reduce costs amid falling international orders and exports.

  The caustic blame game atmosphere left in the wake of the collapse in talks resulted in barbed exchanges and much finger-pointing between the Central Organisation of Finnish Trade Unions (SAK) and the Confederation of Finnish Industries (EK). The general mood among labour unions was lowered further when the government announced its decision on March 21st to reduce Finland's corporate income tax rate from 24.5% to 20%. The corporate tax cut, which the SAK described as "unjustified", followed two years of intensive lobbying by the EK in pursuit of a rate cut to 15%, which industry argued is needed to improve the competitiveness of major exporters as well as small and medium-sized enterprises (SMEs). The corporate tax initiative falls neatly into line with the government's evolving plan to elevate Finland's international reputation as a more attractive manufacturing and research and development (R&D) location, especially among Nordic, Asian and North American investors.

  Unions' mood of discontent

  The mood of gloom within the SAK, and its affiliated unions-the Finnish Confederation of Professionals (STTK) and the Confederation of Unions for Professional and Managerial Staff in Finland (Akava)-could have been potentially worse if the government, in its budget review for 2014-17, had suggested further cuts in social welfare payments. Instead, Jyrki Katainen's diverse six-party "rainbow" coalition government decided that offsetting lower corporate tax with higher indirect taxes was an appropriate way to address Finland's challenges in public finances, economic growth and job creation.

  The budget review includes plans to increase excise taxes and cut public spending, with both measures aimed at saving the Treasury EUR300m (US$380m) each over three years. Consumption-based excise duties on alcohol, tobacco, confectionery, soft drinks and electricity will increase, while value-added tax (VAT) rates will remain unchanged for food and medicines. Moreover, the government will tighten the taxation on profits taken out of companies as dividends. Overall, the government relaxed its previous fiscal targets. Whereas the government still aims to halt the growth of government debt by 2015, it has abandoned its goal of reducing the central government deficit to 1% of GDP from 3.4% in 2012.

  Employers benefit and stand firm

  The corporate tax cuts entailed in the budget review are designed to bolster capital investments by industry and encourage more exporters to expand or maintain business rather than continuing cost-reduction projects requiring layoffs. However, unions claim that employers are more likely to use the benefits from the corporate tax cut to pad profits than to engage in a new centralised wage agreement and negotiate a new wage deal. The government's decision to cut the corporation tax rate has irked unions, which had hoped that any such initiative would have been conducted as part of a tripartite settlement with employers linked to the centralised wage talks. The unions wanted an integrated approach that delivered an overall economic recovery solution. The government's position is that not only can the estimated EUR900m loss in annual revenues from the corporate tax cut be recouped through the excise and tax changes included in the budget review for 2014-17, but that the boost in confidence from these changes could be sufficient to instill greater confidence in business and industry, revitalise employment, and restore economic growth. While the government's corporate tax initiative is intended to stimulate economic growth and job creation within the country's biggest employers, it also seeks to prevent Finnish corporations from relocating their headquarters to lower-tax jurisdictions.

  Unions want a wage increase of up to 3.5% over two years on top of job-creation commitments. However, employers have shown little interest in discussing a centralised deal that includes a wage rise. The starting negotiating position in the EK's talks with the SAK has been to reach a zero wage increase deal in return for improved labour contracts that offer greater job security. That the gap between unions and employers had widened rather than contracted became evident when Mr Katainen invited both sides to late tripartite discussions at his private residence in Kesaranta (located in Finland's capital, Helsinki) on the evening of March 20th.

  Notwithstanding Mr Katainen's intervention, and despite his appeals that an agreement would bolster efforts to achieve a more robust framework on central government spending limits, the meeting proved futile and collapsed over contentious issues on wages and a demand by the EK that unions agree to a cut in earnings-related pension contributions. The pension contributions cut was rejected by the SAK, which viewed the proposal as serving only to further weaken employee purchasing power, while placing a greater contributions burden on younger workers. Meanwhile, employers refused to budge on the wage increase issue, arguing that neither industry nor the Finnish economy could afford to fund a pay increase in the face of economic and financial uncertainty in Europe. The EK's preconditions for returning to the negotiating table are: 1) obtaining trade union agreement for a zero wage rise, and 2) securing trade union acceptance that job security is more important that a wage increase.

  Government hopes for employment boost, but labour unrest looms later in 2013

  The government's need to launch new policy measures to curb rising unemployment remains greater than ever. The latest data from Statistics Finland show that the unemployment rate climbed to 8.7% in January, up from 7.8% a year earlier. This latest negative development reflects the impact of redundancy actions in the fourth quarter of 2012.

  Employment growth is forecast to remain weak during most of 2013, with job numbers expected to contract in all main sectors, but particularly in construction. A recovery in external demand over this period has the potential to strengthen the employment outlook for 2014. Nevertheless, conditions in the Finnish labour market remain turbulent as job losses rise amid an escalation, evident in February and March, of codetermination talks-in Finland, codetermination is a legally mandated step companies must take before laying off personnel. Around 16,000 job losses resulted from codetermination talks in 2012, and the figure for 2013 is likely to be higher still. The potential for large-scale losses remains a very real risk, with major industrial groups, such as Finnair (airline), TeliaSonera (telecommunications), Marimekko (fashion) and John Deere (forestry) all entering codetermination talks in March with the aim of shedding a combined 1,000 employees. Finnair's plan to lay off 300 technical staff provoked a wildcat strike leading to flight cancellations on March 15th. This event could offer a preview of the industrial unrest to come if employer and labour unions remain struck in their current impasse. If left unresolved, the vacuum created by the collapse in centralised wage talks could lead to an outbreak of industrial unrest among the more militant unions in sectors where pay rises remain at zero. The unrest could take place later in 2013; the high-risk months are September, October and November.

  March 27, 2013

• Background

  Finland: Key figures

  Jyrki Katainen

  Energetic and young (still only 40 years old), Mr Katainen became prime minister in June 2011. He has led the centre-right National Coalition Party (Conservatives, or KOK) since 2005 and served as finance minister in 2007-11. Under his leadership, the KOK rose to become Finland's biggest political party for the first time. Leading the current governing coalition has been his biggest test so far. He will have to continue to accommodate demands from the left and right wings within his government and fend off attacks by the leader of the populist, right-wing opposition The Finns, Timo Soini. Implementing robust reforms will thus remain challenging. If his government fails to prevent the economy from falling back into recession and allows the Eurosceptic and anti-immigration The Finns to strengthen their foothold in Finnish politics, particularly amid growing Euroscepticism among the electorate, Mr Katainen's star will start to fade.

  Timo Soini

  Mr Soini is the leader of the far-right The Finns. He emerged from the 2011 election as one of the country's most popular politicians, having garnered more votes individually than anyone else. Mr Soini's anti-immigration and Eurosceptic views have brought him unprecedented popularity. If the government fails to address these genuine public concerns, Mr Soini will almost certainly see his fame increase. His popularity is built, to a large extent, on his ability to appear not like a politician, but like an ordinary citizen. His populism can prove to be a political risk, as he sometimes appears to say whatever the public wants to hear, and thus lacks consistency. However, The Finns have lost some support among the electorate since mid-2011, despite the government's ongoing support for unpopular euro zone bail-outs, after divisions emerged between more extreme and less extreme party members. Partly as a consequence, Mr Soini underperformed in the February 2012 presidential election, polling 10 percentage points less than his party's support rating. What makes his failure even more significant is the fact that Pekka Haavisto of the Green Party, whose platform was in many ways a counter-attack on The Finns' policies, scored 10 percentage points more than his party's rating. This is largely because urban and well-educated voters came out in large numbers to support Mr Haavisto as his views strongly opposed those of Mr Soini and The Finns. Nonetheless, Mr Soini's party is likely to remain an important and destabilising element throughout the forecast period.

  Sauli Niinisto

  Mr Niinisto, who was finance minister from 1995 to 2003 and a former long-time chairman of the KOK, won the 2012 presidential election. His victory gave the KOK an unprecedented grip on political power, holding the posts of both president and prime minister. Mr Niinisto's popularity is built on his legacy as the finance minister whose economic insight and austerity policies lifted Finland out of the severe recession of the 1990s. The head of state, although largely a ceremonial role, will nevertheless remain an important shaper of public opinion, and during a period of economic uncertainty and unstable government-the diversity of the six-party coalition means that the risk of a collapse is higher than usual-Mr Niinisto can be expected to be regarded as an important figurehead for the country. Compared with his predecessor, Tarja Halonen of the Social Democratic Party, he will offer a stronger argument in support of the EU and is likely to seek to steer Finland closer to the US by improving transatlantic relations. His background as a successful minister of finance and a former deputy head of the European Investment Bank will also have an influence. Whereas Ms Halonen tended to focus on global development issues, Mr Niinisto can be expected to direct greater attention to boosting Finnish exports in key overseas markets and trying to improve foreign investment inflows.

  Jutta Urpilainen

  The 37-year-old leader of the Social Democratic Party (SDP) was chosen to renew the party's tarnished image after the 2007 election defeat, but, until the election of April 2011, had been seen as failing in this task. At the election, however, she consolidated her position, as the SDP emerged as the second-largest party. She was consequently appointed finance minister. This has undoubtedly proven to be the biggest challenge of her political career so far. Many people were initially sceptical of Ms Urpilainen's knowledge of economic policy and therefore her ability to push for stricter conditions for the euro zone bail-out mechanisms, which, during her general election campaign, she had promised to do. However, she alleviated these fears by successfully pushing for collateral for Finland's contribution to the second loan facility for Greece in early 2012 as well as to the bail-out of Spanish banks in July 2012.

  September 18, 2012

• Structure

  Finland: Political structure

  Official name

  Republic of Finland

  Form of state

  Parliamentary republic

  Legal system

  Based on the constitution of 1919 (updated in 2000)

  National legislature

  Unicameral Eduskunta (parliament) of 200 members directly elected for a four-year term; the president is empowered to dissolve the Eduskunta at the prime minister's request

  Electoral system

  Universal direct suffrage over the age of 18; the d'Hondt system of proportional representation is used in 15 multimember constituencies

  National elections

  The last elections were in April 2011 (legislative) and February 2012 (presidential); the next legislative elections are due by April 2015 and the next presidential by February 2018

  Head of state

  President, who is declared elected if he or she receives an absolute majority of votes cast in the first round; failing this, a second round is held between the two leading candidates. Sauli Niinisto took office on March 1st 2012 for his first six-year term

  National government

  Council of State (Valtioneuvosto), which consists of the prime minister and up to 18 ministers. The government that was formed on June 17th 2011 is a coalition of the National Coalition Party, the Social Democratic Party, the Left Alliance, the Green Party, the Swedish People's Party and the Christian Democrats

  Main political parties

  National Coalition Party (Conservatives, or KOK; 44 seats); Social Democratic Party (SDP; 42 seats); The Finns party (PS; 39 seats); Centre Party (KESK; 36 seats); Left Alliance (VAS; 14 seats); Green Party (VIHR; 10 seats); Swedish People's Party (SFP; 9 seats); Christian Democrats of Finland (KD; 6 seats)

  Council of Ministers

  Prime minister: Jyrki Katainen (KOK)

  Key ministers

  Agriculture & forestry: Jari Koskinen (KOK)

  Communications & housing: Krista Kiuru (SDP)

  Culture & sport: Paavo Arhinmaki (VAS)

  Defence: Stefan Wallin (SFP)

  Economic affairs: Jan Vapaavuori (KOK)

  Education & science: Jukka Gustafsson (SDP)

  European affairs & foreign trade: Alexander Stubb (KOK)

  Environment: Ville Niinisto (VIHR)

  Finance: Jutta Urpilainen (SDP)

  Foreign affairs: Erkki Tuomioja (SDP)

  Health & social services: Maria Guzenina-Richardson (SDP)

  Interior: Paivi Rasanen (KD)

  International development: Heidi Hautala (VIHR)

  Justice: Anna-Maja Henriksson (SFP)

  Labour: Lauri Ihalainen (SDP)

  Public administration & local government: Henna Virkkunen (KOK)

  Social affairs & health: Paula Risikko (KOK)

  Transport: Merja Kyllonen (VAS)

  Central bank governor

  Erkki Liikanen

  January 01, 2013

• Outlook

  Finland: Key developments

  Outlook for 2013-17

  • The six-party coalition formed in June 2011 represents a broader spectrum of opinion than is usual, which could make it unstable. However, the Economist Intelligence Unit's central forecast is that it will last out its four-year term.
  • Finland will be a more difficult partner in the euro zone than before the 2011 election, largely owing to the electoral gains of a Eurosceptic party, The Finns.
  • Fiscal policy will remain cautious, as the government implements moderate spending cuts and tax rises. We expect the budget deficit to shrink gradually to 0.4% of GDP by 2017, and government debt to rise but remain low.
  • Finland has been comparatively less affected by the euro zone debt crisis, owing to relatively robust domestic demand, a healthy banking sector, benign public finances and little exposure to the highly indebted euro zone countries.
  • Nonetheless, the crisis has contributed to a downturn: after an expected real GDP fall of 0.2% in 2012 and zero growth in 2013, we forecast average growth of 1.7% in 2014-17. A severe deterioration of the euro crisis is a downside risk.
  • Inflation remains elevated. We forecast it to decelerate only slightly to 2.8% in 2013 and 2.4% on average in 2014-17, from an estimated 3.2% in 2012.

  Review

  • The National Coalition Party (Conservatives, or KOK), the senior coalition partner, wants to refloat Destia, the 100% publicly owned infrastructure and construction service company, as a potential sale candidate in 2013-14.
  • However, the KOK's centrist and left-leaning coalition partners are opposed to any major new divestment activity in the current uncertain economic climate.
  • A new draft bank tax bill is intended to raise EUR170m annually in 2013-15 for a well-capitalised and robust bank bail-out reserve fund.
  • Real GDP fell by a seasonally adjusted 0.1% quarter on quarter and 1.1% year on year in the third quarter, driven by sharp falls in fixed investment and exports, while consumer spending remained a bright spot in the economy.
  • Industrial output fell by 0.6% year on year in October (working-day adjusted), but new orders in the manufacturing sector rose by 9.1% year on year.
  • The unemployment rate (national measure) dropped to 6.9% in October.
  • Retail sales volumes rose by an estimated 0.7% year on year in October, and consumer confidence climbed back into positive territory in November.
  • Business confidence deteriorated further in November. Confidence fell in the manufacturing, services and retail trade sectors, while it remained stable at a low level in the construction industry.

  January 01, 2013

Economy:

• Background

  Finland: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	5.4	Population growth	0.4
  GDP (US$ bn; market exchange rate)	263.4	Real GDP growth	0.5
  GDP (US$ bn; purchasing power parity)	202.6b	Real domestic demand growth	1.3
  GDP per head (US$; market exchange rate)	49,093	Inflation	2.4
  GDP per head (US$; purchasing power parity)	37,768	Current-account balance (% of GDP)	1.9
  Exchange rate (av) €:US$	0.72	FDI inflows (% of GDP)	1.5
  a Actual. b Economist Intelligence Unit estimates.

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  Background: Finland has been an independent republic since 1917. Although its language is very different, its social and legal system is similar to that of other Nordic countries. There have traditionally been three main political parties, the Centre Party, the Social Democratic Party (SDP) and the National Coalition Party (Conservatives, or KOK). These were joined by The Finns, which emerged as the third-largest party at the election in April 2011. Other parties are the Left Alliance (VAS), the Green Party (VIHR) and the Swedish People's Party (SFP). Finland joined the EU in 1995 and the euro zone in 1999. It is an active member of the UN.

  Political structure: The head of state is the president, who is elected for a six-year term in a two-round popular ballot. The Eduskunta (parliament) is elected by citizens aged over 18 and has 200 members, who serve for four years. The most recent election took place in April 2011. A six-party coalition of the KOK (44 seats), the SDP (42), the VAS (14), the VIHR (ten), the SFP (nine) and the Christian Democrats of Finland (KD; six) took office in June 2011.

  Policy issues: The success of The Finns at the general election influences the policy agenda. A controversial issue is and will remain loans to weaker euro zone states, which the party opposes. Finland secured loan collateral for its contributions to the second Greek bail-out and the bail-out of Spanish banks. Finland agreed to the new EU fiscal treaty despite concerns about the treaty's compatibility with the Finnish constitution. The role of free markets in the economy will be the subject of general debate, with The Finns and the SDP sceptical of their benefits, but no major policy change is likely. The coalition will try to narrow the budget deficit, although it is small compared with most EU countries. Despite disagreements, particularly between the KOK and the SDP, compromise has been found on tax rises and public spending cuts. Other important issues are energy, environmental policy, entrepreneurship, employment, research and education. Apart from euro zone loans, other foreign policy issues are relations with NATO (of which Finland is not a member) and with Russia.

  Taxation: Corporation tax was cut to 24.5% at the start of 2012. Standard value-added tax (VAT) is set to be raised from 23% to 24% in January 2013. The top rate of personal income tax is 52%. Capital gains tax is 30% (32% for gains above EUR50,000).

  Foreign trade: Exports and imports accounted for 40.7% and 41.4% of GDP, respectively, in 2011. The EU remains Finland's most important trading zone. The current account entered into a small deficit in 2011 and is likely to have remained so in 2012; we estimate the 2012 deficit at 1.4% of GDP.

  Major exports 2011	% of total	Major imports 2011	% of total
  Manufactured goods	35.8	Machinery and transport equipment	29.8
  Machinery and transport equipment	29.8	Mineral fuels, lubricants, and related materials	21.8
  Mineral fuels, lubricants, and related materials	10.3	Manufactured goods	21.4
  Chemicals and related products, n.e.s.	8.5	Chemicals and related products, n.e.s.	10.3
  Main destinations of exports 2011	% of total	Main origins of imports 2011	% of total
  Sweden	11.8	Russia	18.5
  Germany	9.9	Sweden	14.5
  Russia	9.2	Germany	14.3
  Netherlands	6.7	Netherlands	8.0
  EU	55.6	EU	61.5

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  January 01, 2013

• Structure

  Finland: Economic structure

  Data and charts: Annual trends charts

  
  

  

  January 01, 2013

• Outlook

  Finland: Country outlook

  Finland: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The governing coalition consists of the National Coalition Party (Conservatives, or KOK), the Social Democratic Party (SDP), the Left Alliance (VAS), the Green Party (VIHR), the Swedish People's Party (SFP) and the Christian Democrats (KD). The Economist Intelligence Unit's central forecast is that the coalition will stay in office until its term ends in April 2015. However, the diversity of the coalition, and in particular the difference between the right-of-centre KOK and left-of-centre SDP and Left Alliance, means that the risk of a government collapse will be higher than usual in traditionally stable Finland. Budget savings for 2013-15 agreed in March 2012 showed that the KOK and the SDP can compromise on divisive issues such as tax increases. Nonetheless, entrenched divergence persists in many policy areas, as demonstrated in late 2012 by KOK-SDP disagreements over municipal service provision and privatisation of state assets. The rivalry between the KOK and the SDP took centre stage at the municipal elections in October 2012, in which the KOK came first and the SDP second.

  ELECTION WATCH: Although the rivalry between the KOK and the SDP took centre stage at the municipal elections in October 2012, we do not expect this to lead to an early general election (the next one is not due until April 2015).

  INTERNATIONAL RELATIONS: Finland is the only Nordic member of the euro zone. This has caused controversy, as popular opposition to bail-outs of vulnerable members is strong, reflected in support for the Eurosceptic The Finns. The coalition tried to reassure the public by insisting on (and eventually being granted in early 2012) collateral for Finland's contribution to the second loan facility for Greece and, in July 2012, for the planned bail-out of Spanish banks. Finland's approval of the fiscal treaty agreed by most EU members in late 2011 and early 2012 was controversial within the coalition. The tensions highlight that although Finland remains in favour of EU and euro zone membership, it is likely to maintain a tough stance on debtor countries like Spain and Greece.

  POLICY TRENDS: The breadth of the coalition from right to left means that domestic policymaking will be harder than usual. The coalition agreement focuses mainly on holding down the budget deficit through tax rises and spending cuts. The government also hopes to make efficiency gains through local government reform, such as by merging municipalities. The KOK's position is influenced by a paper published by the Confederation of Finnish Industries (EK) in September 2010, designed to improve tax and other conditions for small and medium-sized enterprises (SMEs). Although the SDP opposes many of the proposals, the government has agreed on some measures to support business, including:

  ECONOMIC GROWTH: After a small estimated economic contraction of 0.2% in 2012, we expect zero growth in 2013 (recently revised down from small growth of 0.1% and 0.3%, respectively). Although weak by Finnish standards, Finland's economic performance is still slightly above the euro zone averages for both years (-0.5% and -0.2%, respectively). We believe that real GDP growth will then pick up slowly, to 1.7% on average in 2014-17. Despite Finland's relatively low exposure to the euro zone sovereign debt and banking crisis, a further intensification that could lead to the break-up of the euro area poses a downside risk to our forecast. In this scenario, exports would collapse and Finland would fall into a potentially protracted recession.

  INFLATION: We expect EU harmonised inflation to fall from an estimated 3.2% in 2012 to 2.8% in 2013, well above the euro area average (2.4% and 2.1%, respectively). Inflation should moderate further in 2014-17, to 2.4% on average.

  EXCHANGE RATES: Although not our central forecast, there is a high risk that several countries will leave the euro zone in the next two years. Such fears have led to flight from euro assets and partly explain the volatility of the currency, which depreciated from above US$1.40:EUR1 in August 2011 to a two-year low of US$1.21:EUR1 in July 2012. It then strengthened moderately to US$1.31:EUR1 in mid-December 2012, in response to the promise of central bank intervention to contain interest rates on distressed government bonds. Even assuming that the euro survives in its present form, it will remain volatile owing to shifting risk appetite, economic weakness and lower reserve accumulation by Asian economies. We forecast average exchange rates of US$1.29:EUR1 in 2013 and US$1.26:EUR1 in 2014-17, but sharp movements in either direction remain a significant risk.

  EXTERNAL SECTOR: We forecast that the current account will remain in deficit (albeit not a large one) in 2013-17, after reaching an estimated -1.4% of GDP in 2012. A small surplus on merchandise trade should turn into deficit in the second half of the forecast period, as we expect import growth to exceed export growth on average in 2013-17. The income account should return to surplus, but this will be outweighed by small but persistent deficits on services and current transfers.

  January 01, 2013

• Forecast

  Finland: Country forecast summary

  Country forecast overview: Highlights

  • The prime minister, Jyrki Katainen of the National Coalition Party (Conservatives, or KOK), leads a six-party government. The coalition represents a wide spectrum of opinion from left to right, and a joint programme focused on holding down the government deficit has required difficult compromise. The Economist Intelligence Unit's central forecast is that the government will last for its entire four-year term, but the risk of collapse is significant. The Finns, a right-wing party which emerged as a major force at the general election in April 2011, did not join the coalition, owing to its opposition to euro zone bail-outs.
  • Both The Finns and the Social Democratic Party (SDP) are wary of loans for weaker euro zone countries. Finland secured collateral for its contributions to the second Greek bail-out in early 2012 and to the planned bail-out of Spanish banks in July 2012. Finland signed the new EU fiscal treaty in March 2012 despite the SDP's constitutional concerns. These controversies highlight that Finland's support for future moves to maintain the euro zone cannot be taken for granted.
  • We expect the general government balance to remain in deficit throughout the forecast period, but this should moderate from an estimated -1.9% of GDP in 2012 (which is still well below the euro zone threshold of -3%) to -0.4% by 2017. The coalition has introduced modest tax rises and public spending cuts, intended to preserve Finland's AAA sovereign credit rating. However, it has also introduced several tax cuts for companies and measures to improve export credit financing. The public debt/GDP ratio is likely to peak at around 59.2% of GDP in 2015, much lower than in most other euro zone countries, before falling.
  • Although the economy has been relatively more resilient to the euro area economic and debt crises than many other euro zone countries, we estimate a real GDP contraction of 0.2% in 2012 and forecast zero growth in 2013. This will be followed by a recovery to average growth of 1.7% in 2014-17. The economy could fall into a deep recession if the euro zone crisis were to lead to a break-up, although Finland might remain part of a smaller single currency area.
  • We expect inflation to moderate only slightly in 2013, to 2.8% (after an estimated 3.2% in 2012), before averaging 2.4% in 2014-17.
  • The current account swung from surplus until 2010 to a small deficit in 2011, and we believe that it will continue to record modest deficits during the forecast period as export growth remains fragile.

  Country forecast overview: Key indicators

  Key indicators	2012	2013	2014	2015	2016	2017
  Real GDP growth (%)	-0.2	0.0	1.3	2.0	1.9	1.7
  Consumer price inflation (av, %; EU harmonised measure)	3.2	2.8	2.4	2.3	2.4	2.3
  Budget balance (% of GDP)	-1.9	-1.6	-1.2	-0.9	-0.7	-0.4
  Current-account balance (% of GDP)	-1.4	-1.2	-0.9	-1.0	-1.2	-1.5
  Short-term interest rate (av; %)	0.6	0.2	0.6	1.1	1.8	1.8
  Exchange rate US$:€ (av)	1.28	1.29	1.27	1.24	1.26	1.26
  Exchange rate US$:€ (year-end)	1.30	1.28	1.25	1.26	1.26	1.26
  Exchange rate ¥:€ (av)	102.62	106.19	109.94	110.13	116.13	115.24

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  January 01, 2013

View detailed map

Country Briefing

Land area

303,815 sq km, as well as 34,330 sq km inland water; of the total area, 11.5% is cultivated and 68% is covered by forests

Population

5.4m (end-October 2012)

Main towns

Population (December 31st 2011)

Helsinki (capital): 595,384

Espoo: 252,439

Tampere: 215,168

Vantaa: 203,001

Climate

Temperate, with long, cold winters and short, warm summers

Weather in Helsinki

Warmest month, July (1971-2000, average daily minimum 13.7°C and maximum 20.9°C); coldest month, February (1971-2000, average daily minimum -7.7°C and maximum -2.2°C); driest month, May (1971-2000, average rainfall 32 mm); wettest month, August (1971-2000, average rainfall 78 mm)

Languages

Finnish and Swedish

Weights and measures

Metric system

Currency

The euro (EUR)

Time

Two hours ahead of GMT

Public holidays

January 1st and 6th, Good Friday, Easter Monday, May 1st, Ascension Day, Midsummer's Eve, December 6th, 24th, 25th and 26th

January 01, 2013