Bank of Finland bulletin : Economic outlook : Special issue

PREFACE 1

EXECUTIVE SUMMARY 6

FORECAST ASSUMPTIONS 11

FINANCIAL MARKETS 13

Interest rates 13

Exchange rates 14

Equity markets 15

Credit markets 17

Housing market 19
Box 1. Recent monetary policy in the euro area 21
Box 2. Financial position of non-financial corporations in Finland 23
SUPPLY 25
Output 25
Employment and labour force 26
Productivity and capital 29
Box 3. Labour supply 31
Box 4. Labour input and productivity 34
Box 5. Impacts of economic crisis on potential output 36
DEMAND 38
Consumption 39
General government 41
Investment 43
Export markets and export prices 44
Foreign trade 45
Current account and debt 47
Box 6. World trade and external demand 49
COSTS AND PRICES 51
Labour costs 51
Commodity prices 52
Import prices and domestic producer prices 54
Consumer prices 55
Box 7. Productivity and wage formation 58
Box 8. VAT changes and inflation 60
Box 9. Finland's price competitiveness 62
RISK ASSESSMENT 65
International economy 65
Domestic economy 66
Alternative scenario: strengthening the public finances 68
Box 10. Short-term inflation risks 71

CHANGES FROM THE PREVIOUS FORECAST 73

ARTICLES AND BOXES FROM PREVIOUS PUBLICATIONS 75

FORECAST TABLES T1