Main Features of Finnish Economy in 2012 - 2014

1. The euro crisis has escalated again and the global economic recovery has been delayed;
   an upswing is not expected until mid-2013 at the earliest.

2. Asia, and especially China will still be the growth engine of the world economy
   even though also these countries are affected by the weak foreign demand.

3. Economic growth in the U.S. is expected to be about 2 per cent in 2012 and 2013.

4. In the Euro Area, the GDP will decline by 0.6 per cent in 2012 due to the sovereign debt crisis.
   Even in Germany, the GDP growth will decelerate to 0.7 per cent.
   The European economy is expected to start recovering during the second half of 2013.

5. Euro area inflation will decelerate due to the weakening demand and the decline in non-food raw material prices.

6. The ECB will not increase key interest rates before 2014. Fiscal policy must be tightened in several countries to reduce the public sector deficits.

7. Finnish total export volume will decline by one per cent in 2012. Recovery will be postponed until the second half of 2013.
   Exports will be weak in all main merchandise export sectors. Exports of electronics industry will decline the most in 2012 and 2013.

8. Investments of the business sector will decrease in 2012 and 2013 because of the weak demand prospects.
   Residential construction will also decline in both years. In 2014 investment activity will recover due to improving demand.

9. Private consumption will grow 1.1 per cent in 2012. Growth will decelerate from the 2.5 per cent in 2011
   because of weak employment development and tax increases. In 2013 the growth in private consumption will decrease further
   to 0.6 per cent due to the increase in the VAT and in income taxes, agreed in the central government’s budget for year 2013.

10. Finland's GDP will grow by 0.5 per cent in 2012; next year growth will recover slightly to 1.0 per cent.

11. Unemployment rate is forecast to be about the same as last year, 7.7 per cent. The aging of the population will diminish the labour supply.
    New jobs will be created especially in private services. In 2013 the unemployment rate will increase to 8.0 per cent
    due to the weak demand in 2012 and 2013.

12. The central government deficit will be about 3 per cent of GDP in 2012. It will decline to 1.8 per cent of GDP in 2015,
    due to the austerity measures agreed upon in the frame budget. The central government gross debt will stabilize
    in relation to GDP in 2015, although there are substantial risks for a weaker development.

13. The so-called EMU deficit will disappear in 2014-2015 due to the surplus in the social security funds.
    The EMU debt will increase to 53.7 per cent in relation to GDP in 2014.
    (The social security funds do not practically have gross debt.)

14. Consumer price inflation (the national measure) will decline to 2.9 per cent from last year’s 3.4 per cent in 2012,
    due to the weakening foreign price pressures. In 2013 consumer prices will grow also by 2.9 per cent.
    Increases in the VAT and other indirect taxes will accelerate inflation by a bit more than 0.5 percentage points in both years.

15. The financial problems of the Euro area are the dominant risk. The financial market is vulnerable also in several other countries.
    An additional major risk is related to political developments that affect oil prices (especially the Iranian crisis).