Transcript The Finnish Economic Situation and Challenges

Leif Fagernäs:
The Finnish Economic Situation and Challenges
Finnland-Österreich Wirtschaftsklub
Suomi-Itävalta Liikemiesklubi
Jahresversammlung
17.4.2007
Main Economic Forecasts (ETLA)
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2
LF/mt
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3
LF/mt
GDP, index 1995 = 100
Source: OECD
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4
LF/mt
Industrial production, index 1990 = 100
17.4.2007
5
LF/mt
Productivity by Branch
Labour productivity, index 1985 = 100
750
700
Electronics and Electrotechnics
Manufacturing
650
Total Economy
600
Private Services
Construction
550
500
450
400
350
300
250
200
150
100
1985
17.4.2007
1987
LF/mt
6
Source: Statistics Finland
1989
1991
1993
1995
1997
1999
2001
2003
2005
Public Sector Balance, % of GDP
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7
LF/mt
17.4.2007
8
LF/mt
WEF Clobal Competitiveness Index 2006
Finland´s ranking (out of 125) in various areas
0
Institutions
Higher education and training
Innovation
Health and primary education
Infrastructure
Business sophistication
Macroeconomy
Technological readiness
Market efficiency
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9
LF/mt
5
10
15
20
Source;: WEF
17.4.2007
10
LF/mt
Economic situation
• Short terms prospects good
• Problems in making full use of growth opportunities
– Shortage of qualified labour
– Slow growth of fixed investments
• Impediments to growth will increase in the near future
–
–
–
–
–
Ageing
Slower productivity growth
Increasing difficulties in raising employment
Strained public finances
Supply and price of energy
• Good short term prospects do not remove the need for structural
reforms
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LF/mt
The Supply of Labour Decreases
90000
80000
70000
60000
Arrivals to the labour market
50000
Departures from the labour
market
40000
30000
1990
1995
2000
2005
Source: The Finnish Centre for Pensions
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12
LF/mt
2010
2015
2020
2025
2030
Finland has not been an Attractive Investment Target
Fixed Business Investment 1990 – 2006
250
ind. 1990=100
200
Denmark
Finland
Sweden
Euro area
USA
150
100
50
0
1990
1992
1994
1996
1998
Lähde: OECD Economic Outlook, No 77, 2005
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13
LF/mt
2000
2002
2004
2006e
Stock of Direct Investments, EUR billion
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14
LF/mt
Consumer Prices
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15
LF/mt
Key factors for growth and competitive business environment challenges of the new government
• Reduction of taxes to increase work and employment
• Strengthening of know-how and competencies
• Renewal of innovation policies
• More and successful entrepreneurs
• Functioning labour market
• Availability of energy at reasonable price and mitigating climate
change
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16
LF/mt
Source: OECD
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17
LF/mt
Taxation
• Increase supply and demand of labour
• Lower income tax in all wage categories
• Reduction of highest marginal tax to 50 per cent
• Competitive corporate tax
• Equitable taxation of dividends
• Abolition of inheritance tax of corporate property
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18
LF/mt
International Tax Comparison 2005
Income Tax Percentages in Finland and in
13 Other European Countries, Average
Single employee
55 %
47,5 %
50 %
45 %
37,8 %
40 %
35 %
40,3 %
31,5 %
30 %
33,4 %
24,7 %
29,2 %
25 %
24,8 %
20 %
Finland
Other European
Countries
15 %
10 %
5 %
0 %
20000
30600
€/v
46600
Euroopan maat: Alankomaat, Belgia, Espanja, Iso-Britannia, Italia, Itävalta, Norja, Ranska, Ruotsi, Saksa,
Sveitsi, Tanska ja Viro.
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19
LF/mt
100000
R&D Expenditure in Relation to Value Added and
the Share of High Technology of Exports
R&D-intensity, %
Sweden
5
4
Finland
Japan
3
USA
2
Norway
Germany
Tanska
France
UK
Netherlands
Canada
Ireland
1
Italy
Spain
0
10
0
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20
LF/mt
Lähde:20TEKES, OECD, Science, Technology and Industry Scoreboard 2003
60
50
40
30
Share of High Technology of Exports, %
Innovation policies
• Increase investments in R&D by 7 per cent annually
– Strategic competencies centers
– Commercialisation of technological innovations
• Renew the research structures
– Stronger universities
• Concentration on key areas, economic autonomy, reform of administration
• Incentives for venture capital in growing SMEs
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21
LF/mt
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22
LF/mt
Willingness to Become an Entrepreneur
Portugal
USA
Ireland
Spain
Italy
Greece
EU15
France
UK
Germany
Denmark
Austria
Sweden
Belgium
Netherlands
Finland
%
0
10
20
30
40
50
Survey is Based on 21 000 telephone interviews
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23
LF/mt
Source: Flash Eurobarometer 160, 2004
60
Functioning labour market
• More flexibility in collective agreements
– Wage rises and working-time arrangements decided on company level
• Availability of qualified labour
–
–
–
–
Vocational training to respond to the needs
Better regional mobility
Removal of unemployment traps
Increase of work-based immigration
• Social security to encourage employment
– Reform of unemployment benefits
• Better labour peace
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24
LF/mt
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25
LF/mt
Sustainable energy policy
• Need for electricity will grow by 10-15 per cent by 2020
• Favourable conditions for diversified energy production
– in particular emission free energy, including nuclear power
• Strategy for the use of biomass for energy and industry
• Reduction of electricity tax
• Global climate policy
– Level playing field
– Rewards for energy efficiency
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26
LF/mt
Electricity Supply by Energy Sources 2006
Total 90,0 TWh
Net imports
12,7 %
Oil
2,0 %
Coal
17,9 %
Hydro power
12,6 %
Wind power
0,2 %
Peat
6,9 %
Biofuel
11,3 %
Waste fuels
1,1 %
Natural gas
10,9 %
Source: Finnish Energy Industries
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27
LF/mt
Nuclear power
24,4 %
World GHG Emissions
GHG emissions in MtCO2-eq.
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Rest of World
Asia
Latin America
USA
EU-25
2000
Source: European Commission
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28
LF/mt
2010
2020
2030