The output gap has closed; Finland's economy at cyclical peak

Abstract

Potential output is defined as the volume of GDP where all of the economy’s factors of production are fully and efficiently utilised. Estimates show that Finland's output gap remained negative for nine consecutive years leading up to 2017, indicating that the country’s volume of real GDP underperformed its potential during this period. The output gap has finally closed on the back of Finland's economic boom which is expected to last throughout 2018–2020. Over the medium term, however, potential growth is likely to remain considerably slower than before the financial crisis.