Finland stepped out of recession during the reporting year, even though demand for Finnish exports has not recovered as expected. However, economic growth is expected to continue because estimates of the recovery of the global economy have strengthened to some degree and the competitiveness pact for the labour market increases our competitiveness in international markets.
In the eurozone, structural changes have been implemented slowly, which may decelerate economic growth in the region.
At present, there are a number of global risks. The consequences of Brexit and the new president of the United States are yet unknown, the development of the geopolitical situation is difficult to estimate and conventional economic standards do not seem to apply in the current operating environment. These factors will cause uncertainty over the global economy for a long time to come.
In December, The Bank of Finland stated that the Finnish economy has undergone a slight upturn. Even though this growth is largely based on private consumption and building investments, production investments are also showing signs of recovery. During 2016, industrial production grew for the first time in four years. However, the GDP has not even reached the 2008 level.
The working age population is becoming smaller, which can be seen in the increase in job vacancies. Furthermore, consumption-based growth in the national economy has created more jobs, especially in services and construction. Even though the employment situation continues to improve, the unemployment rate is decreasing slowly due to imbalance between the supply and demand of jobs. The number of long-term unemployed is alarming and decelerates economic recovery.
The rate of inflation accelerated towards the end of 2016, while the increase in prices is expected to remain moderate, close to 1 per cent. However, the increase in the prices of energy and raw materials may speed up the rate of inflation.
During the reporting year, the competitiveness pact signed by labour market associations curbs salary increases and the pressure to increase prices. The tax cuts promised by the Finnish Government, combined with low interest rates, support purchasing power.
According to advance information issued by Statistics Finland, Finland's population increased by 15,000 people in 2016, being approximately 5.5 million at the end of the year. The most important reason for this population growth was immigration as the number of people moving in was approximately 16,000 higher than the number of people moving out. There were 984 more deaths than births. Immigration speeds up urbanisation and brings much sought after new workforce.
The increase in private consumption has been strong considering the general trend, and consumer confidence is at its highest since spring 2011 and clearly above the long-term average. The improved employment situation has increased confidence among consumers. This increased confidence indicates that the outlook on new economic growth has strengthened in Finland.
The Russian GDP decreased at the beginning of the year but evened out towards the end of the year because of the increase in oil prices and the agreement signed by OPEC members to restrict oil production in 2017. After this agreement was announced, the price of oil and the exchange rate for the Russian rouble increased rapidly. As the economy recovers and Russia's income from exports increases, imports are expected to grow moderately. During the reporting year, the rate of inflation was close to 5–6 per cent, but its deceleration is estimated to be caused by temporary factors. Russia's national economy still involves a number of risks associated with geopolitics and raw material prices.
The housing market recovered during the year: apartment construction increased, the number of transactions grew and housing investments were active.
As a result of megatrends, the production structure will undergo major changes. Innovation, businesses and jobs are mainly created in urban environments where people and ideas meet.