Finland: Selected Issues
IMF Staff Country Reports, May 28, 2014
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Bibliographic details
- Published: May 28, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498331333.002
Key findings on output and growth
- Finland is struggling to recover from the Great Recession, indicating deeper, structural issues may be holding back growth.
- Estimates of potential output for Finland are an important part of the toolkit for policymakers—but they come with a degree of uncertainty.
- The use of different methodologies and assumptions can lead to different results in potential output estimates.
- Indications that Finnish potential output growth is low at this juncture:
- From 1997 to 2007, potential growth, independent of the choice of smoothing, averages 3.2 percent per year.
- In 2013, that average has dropped to 0.2 with several of the models producing negative growth.
- The lack of a recovery in Finland is largely structural in nature.
- Any indication that the output gap is closing is due to falling potential rather than a pickup in growth.
Analytical implications
- Different modeling approaches (including filter approaches such as the HP filter) produce materially different potential output and output gap estimates, underscoring measurement uncertainty.
- Declining measured potential output implies that conventional cyclical interpretations of weak performance may be misleading.
Policy recommendations and reform priorities
- Structural reforms aiming to enhance Finland’s long-term capacity offer clear advantages given the structural nature of the slowdown.
- Total factor productivity enhancing measures could be crucial in helping the economy recover despite the time it takes to implement them.
Content in this bundle
- Finland: Selected Issues; IMF Country Report 14/140; April 30, 2014