- Finnish Economy Minister Olli Rehn reveals GDP outlook cut
- Trade minister says protectionism will kill Finnish jobs
The minister in charge of trade in Finland says there’s a real risk global advances are reversed amid a geopolitical shift that threatens to kill jobs and undermine prosperity.
For a small country like Finland -- a euro member that shares the European Union’s longest border with Russia -- the picture is “very dark,” Kai Mykkanen, foreign trade and development minister, told Bloomberg in an interview. “If countries start erecting customs walls, and if free trade doesn’t advance, then this genuinely means the loss of jobs for us.” In a separate interview, Economy Minister Olli Rehn revealed the government is cutting its growth forecast for this year.
Trade-reliant nations are growing increasingly alarmed at signals from the U.S., where both presidential candidates have criticized the Trans-Pacific Partnership designed to support ties between North America and a group of Asian nations. France has said it wants to end talks on an equivalent deal -- TTIP -- between the U.S. and Europe. Meanwhile, Europe is grappling with the fallout of Britain’s decision to leave the EU while relations between Russia and the west continue to deteriorate.
Finland’s geographical proximity to Russia means the government in Helsinki follows the signals from Moscow very closely.
“The risk that the west and Russia drift into an escalated confrontation in the near future is now much greater than we’d have anticipated five years ago,” Mykkanen said. “This is deplorable. We thought 15 years ago that the cold war was definitely over, but now the risk is that we’re drifting into a protracted period of trouble.”
Finland, which relies on exports for about 40 percent of its output, is already an economic laggard in Europe. Its gross domestic product contracted in 2012 through 2014, and will grow less than half the average in the bloc both this year and next, the European Commission estimated in May.
The economy stagnated in the second quarter, while first-quarter GDP growth was revised down to 0.3 percent, half the rate previously estimated, Statistics Finland said on Tuesday. On an annual basis, work-day-adjusted GDP was 0.4 percent, a third the revised growth rate of the first quarter, the office said.
Rehn said GDP will grow 1.1 percent in 2016, compared with the government’s June forecast for 1.4 percent growth. The government said on Tuesday it will publish the full set of revised numbers on Sept. 15, four days earlier than originally planned. In a separate report, Nordea Bank AB predicted Finnish growth will have peaked this year, at 1 percent, and will slide to 0.6 percent by 2018.
Finnish unemployment, though falling, is still the highest in the Nordic region, at 7.8 percent in July. The country has been stripped of its AAA ratings at Moody’s, S&P and Fitch over the past year and a half, as its economic prospects deteriorate. Much of that is to do with productivity levels not keeping pace with wage growth. Key industries, such as the consumer electronics business that was once led by Nokia Oyj, have failed to keep pace with leaner global competitors.
The nation of 5.5 million people probably won’t be able to continue providing the famed Nordic welfare model if its trade prospects deteriorate significantly, Mykkanen said.
“We can only maintain our welfare standards in the future if we can continue to produce paper for 50 million people and make electronic products for 100 million people while we import German cars,” he said. “Our small economy alone doesn’t permit the kind of specialization that our welfare model is based on.”