Latest articles and blogs
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Productivity and energy costs are weaknesses in euro area competitiveness
Economic growth in the euro area has been undermined in recent years by the erosion of competitiveness in relation to the United States and China. This has been mainly attributable to the subdued growth in labour productivity and the fact that energy has remained significantly more expensive than in competitor countries.
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How would higher defence spending affect Finland’s economic growth?
Along with many other European countries, Finland intends to increase its defence spending. This would increase Finland’s public expenditure and spur economic growth. The larger the share of defence procurements purchased from within the euro area, the more favourable the impact.
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Finnish economy would recover more rapidly if exports and consumption pick up
At the turning points of business cycles, economic recovery has often turned out to be faster than forecast. Growth could pick up if consumers’ confidence in the economy and in their own finances were to strengthen more than expected and exports to grow more quickly than forecast.
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Alternative scenario: Core inflation could be higher than anticipated in the immediate years ahead
A wage-price spiral may occur in which prices and wages rise and ultimately GDP growth slows down.
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Corporate profits not indicating changes in firms’ pricing strategies
Companies do not appear to have sought to benefit from high inflation by increasing their prices and boosting profits.
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Cost competitiveness is key in replacing lost trade with Russia
Finland’s cost competitiveness has strengthened in recent years, but it has yet to fully recover to the level attained before the financial crisis. Improving cost competitiveness is especially important now, when companies are searching for new markets to replace lost trade with Russia.
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The depths of the COVID-19 crisis, and the recovery
In the Bank of Finland forecast, the COVID-19 crisis is not expected to cause such a deep recession as experienced in the financial crisis, and recovery will be faster. The virus could, however, leave long-term scars on e.g. employment, the capital stock and productivity.