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COUNTRY SNAPSHOTS 2017-18

Denmark Investment picking up Economic growth is projected to gradually strengthen to 1.9% in 2018 fuelled by investment and exports. Household consumption growth will remain robust, backed by employment growth, higher real wages and rising property prices. Both residential and business investment will pick up due to low interest rates and increasing capacity utilisation. The current account surplus will remain sizeable. Implementation of a proposed comprehensive package of reforms addressing a number of structural challenges, such as strengthening work incentives, fostering medium-term fiscal sustainability and boosting productivity, would improve economic performance and raise incomes. Frontloading property tax reform would help to rein-in an increasingly buoyant housing market and make the tax mix more growth friendly. GDP growth 2013

2016

Current prices DKK billion

1 929.7

2017

2018

% real change

1.0

1.5

OUTLOOK

ECONOMIC OUTLOOK

uncertainties about European integration. High unemployment and modest wage growth will hold back private consumption, while exports will be hampered by soft global trade and by weaker growth in the UK following the Brexit referendum. Inflation is set to rise very gradually. Across euro area countries, major differences in growth and unemployment prospects will persist. The monetary policy stance should remain accommodative until inflation is clearly rising to the target of near 2%. However, monetary policy has become overburdened and should get more support from fiscal and structural policies. The projected fiscal stance is only slightly expansionary: a stronger fiscal stimulus with accompanying growth-friendly changes in the spending and taxation structure would rebalance the policy mix and support long-term growth. Completing the single market in services and network sectors would boost investment and productivity. Faster resolution of non-performing loans is also essential for stronger investment and may require establishing asset management companies and waiving existing bail-in procedures. Completion of the banking union would strengthen confidence and resilience to future crises.

1.9 GDP growth

Estonia

2015

Gaining momentum

10 387.8

GDP growth is projected to gain momentum in 2017 and reach 2.9% in 2018, mainly driven by domestic demand. Private consumption will remain robust and public investment will pick up, sustained by EU funds. Despite a favourable business environment and good financing conditions, private investment will recover only slowly. Exports will strengthen backed by increasing external demand. However, maintaining price competitiveness will be challenging due to increasing labour costs. Fiscal policy will ease slightly but remain tighter than the fiscal rule of a structural balanced budget. Remaining inefficiencies in insolvency procedures, barriers to SME lending and labour shortages all undermine capital spending and productivity growth, calling for reforming the legal system, promoting new forms of business financing and strengthening the supply of marketable skills further. GDP growth 2013

2016

Current prices EUR billion

18.9

2016

Current prices EUR billion

2017

2018

% real change

1.1

2.4

2.9

Euro area

2017

2018

% real change

1.7

1.6

1.7

Finland Coming out of recession Rising private consumption and investment growth have pulled the economy out of recession. However, output growth is projected to remain sluggish over the coming years, as domestic demand growth is projected to weaken again, although export growth will rise significantly as external demand edges up and competitiveness improves. Unemployment will decline modestly and inflation will pick up only slowly. Substantial progress has been made on implementing the government’s reform programme. The social partners have agreed on a Competitiveness Pact, which lowers labour costs in 2017, and on wage moderation over the following years. Enhancing labour market flexibility would raise the employment rate further. Health care reform is also moving forward, with the decisions to shift some responsibilities from municipalities to newly-created regional institutions in 2019 and reform funding mechanisms. After easing in 2016, the stance of fiscal policy is set to be broadly neutral in 2017-18.

Investment weakness GDP growth

Economic growth is projected to remain subdued. Despite supportive monetary conditions, investment weakness will persist, reflecting low demand, banking sector fragilities and

2013

2016

Current prices EUR billion

203.3

2017

2018

% real change

0.9

0.9

1.1

OECD Observer No 308 Q4 2016

43

OECD Observer No 308 Q4 2016  
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