The economy will grow if policy mistakes are avoided

The outlook for economic growth is favourable, but a numerous factors of uncertainty cast a shadow over developments. The uncertainty stems primarily from international political risks In the United States one source of risk is a broad lack of confidence in the success of the new president’s economic policy. The rise of populist movements and a simultaneous distrust of the euro system are sources of concern in Europe. Economic indicators point to higher growth in Finland and elsewhere, but at least so far there is still a clear mismatch between ”soft” and ”hard” indicators. According to our forecast the Finnish economy will continue to recover. During 2017- 2018 exports will increase as a result of strengthening export demand as well as improved price competitiveness in the economy and the resulting creative renewal of the economy. Investment growth will also continue at a fairly brisk pace, and low interest rates will boost private consumption. There are nevertheless also risks concerning domestic economic policy. The government’s ability to ensure unity in its key structural reforms will be tested during the forecast period. The challenge in the labour market is to carry out controlled union-level negotiations in a situation where an export-oriented salary model and the form of the necessary wage coordination are still open.

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