Executive summary

A summary of Bank of Finland forecasts for the Finnish economy in 2005-2007 indicates a growth of approximately 3 percent slowing to about 2.5 percent in 2007. A significant part of the growth figures reflect the contribution of the electronics sector which passes most of the benefits of productivity growth to foreign consumers in the form of lower prices but does not affect income levels in Finland. Attention is given to the negative economic impact of problems related to matching supply and demand and aging of the population. Other issues discussed include sluggish investment growth; the possibility that consumption will grow more slowly than expected because of a decline in consumer confidence; difficulties related to Finland's export industries; and an anticipated workforce expansion in both the public and private sectors resulting in a drop in unemployment to 8.5 percent by 2007. Inflation is expected to remain relatively subdued in the near future although uncertainty surrounding productivity development could present long-term inflation risks. It is predicted that the world economy will grow 4 percent in 2005-2007.