Despite an increase in value-added tax, Labore’s research suggests that the Finnish economy is still in the early stages of recovery. The institute’s Forecasting Manager, Juho Koistinen, believes that the timing of the tax changes may be unfortunate and slow down economic recovery. This differs from the optimistic official forecast by Labore, which is different from estimates by the Bank of Finland and the Ministry of Finance.
Labore predicts a 0.5 percent shrink in the economy next year due to public finance balancing, but Koistinen considers this estimate cautious. Preliminary data from Statistics Finland highlights a 0.2 percent GDP growth in January-March compared to the previous quarter, but a 1.2 percent contraction from the same period last year. Strikes that closed ports impacted economic growth at the beginning of the year, affecting exports of goods and services. However, Labore expects exports to rebound in the remaining quarters as long as uncertainties in international markets are resolved and there are no further port closures or strikes.
Labore also notes that investments, particularly in residential construction, declined at the beginning of the year due to uncertainty about public finances and low interest rates. The institute maintains an optimistic outlook on residential construction recovery in later quarters but acknowledges it poses challenges to overall economic growth if not addressed soon.
Overall, Labore suggests that while there are some positive signs for economic growth ahead, such as improvements in exports and potential developments in international markets, it remains uncertain whether these will be enough to overcome ongoing challenges related to public finances balancing and uncertainty about global economic conditions.
In conclusion, despite an increase in value-added tax revenue for government coffers, Labore believes that Finland’s economy is still recovering slowly due to government efforts to balance public finances and international uncertainties.
The tightening of value-added tax may coincide with this early stage of recovery but could have negative consequences on consumption levels and overall economic growth prospects.
Finnish government officials should continue their efforts towards improving consumer confidence through fiscal policies while keeping a close eye on global market trends to ensure sustainable long-term economic growth for Finland’s citizens.
