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The following OECD assessment and recommendations summarise Chapter 1 of the Economic Survey of Finland 2006 published on 4 May 2006.
Contents
Growth over the past decade has been among the strongest in the OECD. Finland also ranks highly as regards innovation performance and educational attainment, both of which are key drivers of productivity. However, there has been a marked weakening in growth performance since the turn of the millennium; the contribution from the ICT sector to aggregate productivity has been much smaller and increases in the employment rate have been meagre, though the employment rate among the old has been increasing rapidly from a low level. Moreover, income growth could fall further because over the next 25 years population ageing is among the most rapid in the OECD; the number of employed workers for each welfare benefit recipient, including those on unemployment benefit and all forms of pensions, could drop from 1.7 currently to about 1.0 by 2030, if current age-specific employment and benefit recipiency rates are maintained. The main challenges facing policy-makers are to sustain the growth in living standards by boosting productivity, especially in the sheltered sector and in public services, by realising the government’s ambitious employment targets as well as by ensuring fiscal sustainability and reducing future pressures on taxation, especially those on labour.
The sources of differences in income
2004, in current USD PPPs
1. Percentage gap with respect to the US level.
2. Labour resource utilisation is measured as total number of hours worked divided by working-age population.
3. Labour productivity is measured as GDP per hour worked.
Source: Statistics Norway; OECD, National Accounts and Labour Force Statistics.
Growth in 2006 is likely to exceed 3%, which according to OECD estimates will take output clearly above potential for the first time since the global downturn in 2000. The growth figure for this year partly reflects a bounce-back from the coincidence of a labour dispute in the paper industry and a temporary lull in the electronics industry in the first half of 2005, although with output growth picking up strongly in the second half growth in 2005 was still 2%. Employment growth picked up surprisingly strongly through 2005, raising the possibility that if it continues at this rate the government might meet its objective of raising employment by 100 000 over the electoral period. Inflation as measured by the harmonised consumer price index (CPI) is currently about 1%, the lowest in the euro area and mostly accounted for by higher energy prices. Rises in non oil import prices, especially for intermediate goods, as well as demand pressures, are likely to push up inflation somewhat; however, the central wage agreement which runs to mid 2007 will ensure that any pick up will not feed into higher wage inflation and so keep price inflation below 2%.
Recent progress towards the employment target
Change in employment(1) relative to March 2003(2)
1. Employment is measured as the average over previous 12 months to eliminate seasonal effects.
2. The last general election was in March 2003 and the election period is a maximum of 4 years.
Source: Statistics Finland.
How to obtain this publication
The Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
The complete edition of the Economic Survey of Finland 2006 is available from:
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SourceOECD for subscribing institutions and many libraries
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OLISnet, under "Publication Locator", for government officials with accounts (subscribe)
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Additional information
For further information please contact the Finland Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Dave Turner, Asa Johansson and Laura Vartia under the supervision of Peter Hoeller.
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