economic outlook 2015-2017
TRANSCRIPT
Juha Kilponen
1Julkinen
Suomen Pankki
Economic Outlook 2015-2017
Euro & talous 10 December 2015
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen Julkinen
Economic situation for Finland continues to be difficult
Economic growth in Finland will be among the weakest in the euro area in the forecast period
Finland’s export market dynamics weaker than previously forecast
Productivity growth will remain very slow, with no improvement in competitiveness
No significant correction in the general government balance
2
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 3Julkinen
Growth will remain subdued
Real GDP, %
December June2014f: -0.4 -0.12015f: -0.1 0.22016f: 0.7 1.22017f: 1.0 1.3
-10
-5
0
5
10
120
140
160
180
200
220
1999 2002 2005 2008 2011 2014 2017
% change on previous year (right-hand scale)
At reference year (2010) prices (left-hand scale)
EUR bn %
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Real GDP
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 4Julkinen
Euro area growth broadly based; Finland will fall behind
Real GDP, %
Finland (BoF) Euro area (ECB)
2014: -0.4 0.92015f: -0.1 1.52016f: 0.7 1.72017f: 1.0 1.9
90
100
110
120
130
140
1999 2004 2009 2014
Finland Euro area
Index, 1999Q1 = 100
Real, GDP
Forecasts: Bank of Finland (Finland) and European Central Bank ( euro area).Sources: Statistics Finland, Eurostat, Bank of Finland and ECB32353
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 5Julkinen
Frail growth dependent on domestic demand
-4
-2
0
2
4
6
2011 2012 2013 2014 2015 2016 2017
Net exports Private consumption
Public sector demand Private investment
Inventory change and statistical discrepancies
% change in GDP volume
The chart is merely indicative. The GDP growth contribution of each demanditem has been calculated on the basis of its volume growth and its value share in the previous year. The figures for 2015–2017 are forecasts.Sources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Contributions to growth, components of aggregate demand
% points
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 6Julkinen
Real income growth will sustain consumption
Real private consumption, %
December June
2014: 0.5 -0.22015f: 0.5 0.22016f: 0.6 0.42017f: 0.6 0.7
-4
-2
0
2
4
6
2010 2012 2014 2016
%
Savings ratio Housholds' real disposable income*Real private consumption*
Households = households and non-profit institutions serving households.* % change from previous yearSources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Household's disposable income, consumption and savings
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 7Julkinen
Investment recovers slowly– investment rate remains low
Private investment, %
December June
2014: -3.9 -6.52015f: -1.1 -2.52016f: 3.3 2.72017f: 2.8 2.2
80
90
100
110
120
130
140
2000 2005 2010 2015
Private investment
Private investment excl. housing construction
Housing construction
Index, 2000 = 100
Sources: Statistics Finland and Bank of Finland.
10 December 2015bofbulletin.fi
Slight upturn of investments
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 8Julkinen
What explains investment growth?
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017
Financing Fiscal policy Domestic demandMonetary policy Foreign factors Price marginsProductivity Other Private investement, %
%, trend deviation
Source: Bank of Finland calculations.
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 9Julkinen
Foreign trade and external balance
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen Julkinen
The recovery of exports delayed
10
Exports, % December June
2014: -0.7 -0.42015f: 0.1 0.62016f: 2.1 3.32017f: 2.7 4.0
80
90
100
110
120
130
2007 2009 2011 2013 2015 2017
Exports Imports Export marketsIndex, 2007 = 100
Source: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Developments in Finnish exports, imports andexport markets
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 11Julkinen
Forest industry still one of the pillars of foreign trade
-2 500
-2 000
-1 500
-1 000
-500
500
1 000
1 500
2 000
2 500
1989 1994 1999 2004 2009 2014
EUR million per month
Converted into 2014 euros using the GDP deflator; data-smoothing by the HP filter.Sources: Finnish Customs and calculations by the Bank of Finland.
10 December 2015bofbulletin.fi
Finland's trade balance by goods category
Wood and paper products
Computers and electronic equipment
Machinery and equipmentBasic metals and metal products
Refined oil products
Crude oil and natural gas
Other
Metallic minerals
FoodsTransport equipment
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 13Julkinen
Labour market
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 14Julkinen
Labour market decline bottomed out
Unemployment rate, %
December June2014f: 8.7 8.72015f: 9.4 9.12016f: 9.2 8.92017f: 9.1 8.6
4
6
8
10
12
2 200
2 300
2 400
2 500
2 600
2005 2010 2015
Number of employed (left-hand scale)Unemployment rate (right-hand scale)
1,000 persons %
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Unemployment and employed population, trend
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 15Julkinen
Wages and prices
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 16Julkinen
Inflation sluggish
HICP, % December June
2014: 1.2 1.22015f: -0.1 0.22016f: 0.3 1.02017f: 1.0 1.5
-2
-1
0
1
2
3
4
5
2008 2010 2012 2014 2016 2018
FoodstuffsEnergyServices and industrial goods excl. energyInflation
Sources: Statistics Finland and Bank of Finland.10 Dec 2015bofbulletin.fi
Components of HICP inflation
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 17Julkinen
Differences in Finnish and euro area inflation partly explained by increases in indirect taxation
-1
0
1
2
3
4
2005 2007 2009 2011 2013 2015
Finland Euro areaCumulative effect of changes in taxation on the consumer price index since 2005, %
Source: European Central Bank.10 Dec 2015bofbulletin.fi
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 18Julkinen
Slow growth in wages and labour productivity
Compensation per employee and productivity, %
Compensation per employee Productivity
2014: 1.4 0.02015f: 1.8 0.22016f: 1.4 0.32017f: 1.5 0.5
-6
-4
-2
0
2
4
6
8
10
2003 2005 2007 2009 2011 2013 2015 2017
Compensation per employeeUnit labour costsProductivity per person employed
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
Productivity and wage developments
Prosenttimuutos edellisestä vuodesta
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 19Julkinen
Public finances
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 20Julkinen
Public finances will barely improve
-8
-6
-4
-2
0
2
4
6
8
1999 2004 2009 2014
Social security fundsCentral government and local governmentTotal general government
General government net lending
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015bofbulletin.fi
% of GDP
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 21Julkinen
Debt will continue to grow at a rapid pace – debt ratio will exceed 68%
Debt ratio, %
December June
2014: 59.3 59.32015f: 62.8 62.52016f: 65.7 65.12017f: 68.1 67.3
40
42
44
46
48
0
20
40
60
80
1999 2004 2009 2014
General government EDP debt (left-hand scale)Total tax ratio (right-hand scale)
% of GDP
Sources: Statistics Finland, State Treasury and Bank of Finland.
10 Dec 2015bofbulletin.fi
General government debt and total tax ratio
%
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 22Julkinen
Risks and alternative scenario
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 23Julkinen
Forecast risks more on the downside
[-] Uncertainties in the global economy
[+] Euro area demand may recover faster than expected
[-] In the domestic economy, the main risks relate to economic policy and the labour market
Alternative scenario: Finnish exports fall further behind export markets
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 24Julkinen
Forecast summary
Forecast summary
Percentage change on previous year2014 2015f 2016f 2017f 2014 2015f 2016f 2017f
Gross domestic product -0.4 -0.1 0.7 1.0 Labour market
Private consumption 0.5 0.5 0.6 0.6 Hours worked -0.7 0.1 0.5 0.5
Public consumption -0.2 -0.1 0.6 0.6 Total employment -0.4 -0.3 0.4 0.4
Private fixed investment -3.9 -1.1 3.3 2.8 Unemployment rate, % 8.7 9.4 9.2 9.1
Public fixed investment -0.9 -2.3 1.3 1.4 Unit labour costs 1.4 1.7 1.1 1.0
Exports -0.7 0.1 2.1 2.7 Compensation per employee 1.4 1.8 1.4 1.5
Imports 0.0 -2.8 3.2 2.8 Productivity 0.0 0.2 0.3 0.5
Contributions to growth
Domestic demand -0.5 0.0 1.1 1.0 Gross domestic product deflator 1.6 0.5 1.0 1.0
Net exports -0.3 1.1 -0.4 0.0 Private consumption deflator 1.6 0.2 0.4 1.0
Inventory change + statistical discrepancy 0.4 -1.2 0.1 0.0
Household saving ratio, % -0.3 0.1 0.6 0.7 Harmonised index of consumer prices 1.2 -0.1 0.3 1.0Excluding energy 1.5 0.3 0.5 0.8
Current account, % of GDP -0.9 -0.1 -0.2 -0.3 Energy -1.7 -5.8 -1.8 3.6
f = forecastSources: Statistics Finland and Bank of Finland.
Suomen Pankki – Finlands Bank – Bank of FinlandJuha Kilponen 25Julkinen
Thank you