I almost would put this under the heading of ‘I told you so’ but I am not so happy about this, because this will mean only more unemployment and suffering for Finland.
So in short: the Finance Ministry publishes twice a year a forecast on economic indicators. The latest forecast is much more downbeat than the last. In the previous forecast (of September) forecast a decline in GDP of 0,5 %, whereas now it forecasts 1,2%% decline. For 2014 it forecast earlier a growth of 1,2% and now 0,8%. (news from Taloussanomat here).
This is not good news although for 2015 the ministry is more upbeat, counting on a revival of industry exports. But this bit caught my attention (my translation):
According to the Ministry of Finance the weak development of the Finnish economy has been wide-spread: private consumption and investment declined significantly. The pull to growth has mainly come from public consumption and public investment. It has helped also that imports were slightly smaller than exports.
How can this be a surprise still? For years all kinds of economists have said that the problem is of weak aggregate demand and yes, of course public consumption and public investment will then help to pull the economy forward (see some links in this post). I also have written that for Finland the domestic demand is more important than exports.
I hope that certain parties in the current Finnish government will begin to see the light finally, otherwise they will be in for a rough ride in the next elections.
I am wondering what the ultra-modest wage increases next year will do for a) inflation and b) purchasing power (which are kind of the same thing). I have some fear that inflation in Finland, given rising unemployment and declining growth will decline. Hopefully not to deflation levels.