Presentation - OECD Economic Survey of FINLAND 2022

OECD ECONOMIC SURVEY OF FINLAND 2022 Towards a Strong and Sustainable Recovery

15 December 2022 Helsinki, Finland

•

Main messages

To close the gap in GDP per capita with the other Nordic countries, productivity growth must increase and the employment rate rise, notably for older workers. Addressing the structural shortage of skilled workers through tertiary education and migration reforms is critical for strengthening productivity growth.

• Fiscal consolidation is required to stabilize the government debt-to-GDP ratio in the long run. Regular comprehensive spending reviews would help to identify savings.

• Further measures are needed to improve the efficiency with which Finland’s greenhouse gas emissions abatement objectives are achieved and to increase the forestry and other land-use sink.

economy

COVID-19 shock

Source: OECD Economic Outlook database.

The

recovered quickly from the

but has now slowed

The labour market has recovered swiftly

% %

Unemployment rate (lhs) Employment rate (rhs)

Source:

Economic Outlook (database).

The

Source: OECD staff calculations based on OECD Labour Force Statistics database.

Hard-to-fill vacancies have increased

%

Hard-to-fill vacancies as a share of open vacancies (lhs)

Hard-to-fill vacancies (rhs)

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 0

Note: Hard-to-fill vacancies are open job vacancies during the reference period that the employer finds hard to fill. Source: Statistics Finland.

Household indebtedness has increased to a high level

RESTORING PUBLIC FINANCE SUSTAINABILITY

The structural budget deficit remains relatively large

%

General government, % of GDP

1. Cyclically-adjusted net lending, per cent of potential GDP.

Source:

(2022),

Outlook

Structural balance¹ Net lending

(database).

Government debt would increase substantially under unchanged policies

Gross general government debt, % GDP

120

Baseline scenario Reform scenario¹ Baseline scenario and MTO²

100

80

60

40

20

0

140 2021 2030 2040 2050 2060 2070

1. In the reform scenario, improvements in the innovation system increase the level of GDP by 3% over the baseline by 2050 and work-based immigration rises gradually from the current level (1 500 per annum) in 2030 to 7 500 per annum in 2050-70. In addition, fixed capital is assumed to grow faster (at 2% per year throughout the projection) than in the baseline scenario (0.9% per year from 2040 onwards). Higher growth in the fixed capital-to-labour ratio is the main factor increasing growth in labour productivity (to 1.4%) and output (to 1.1%) in the reform scenario.

2. In the MTO scenario, Finland continuously meets its medium-term budgetary objective of a structural financial balance of minus 0.5% of GDP from 2030. Source: OECD.

REDUCING GREENHOUSE GAS EMISSIONS EFFICIENTLY

Finland is on track to meet its gross GHG emissions objectives

Note: The ‘with existing measures’ (WEM) scenario includes climate and energy measures implemented by 31 December 2019. Measures approved by the government after 1 January 2020 are included in the ‘with additional measures’ (WAM) scenario. For more details on the two scenarios, see Honkatukia et al., 2021[2].

Source: Honkatukia et al., 2021[2].

The forestry and other land-use sink needs to increase

Mt CO₂-eq.

Gross GHG emissions targets

Forestry and other land-use targets

Emissions without forestry and other land-use Emissions with forestry and other land-use

Forestry and other land-use

Source: Statistics Finland; Honkatukia et al., 2021[2].

REBOOTING THE INNOVATION ECOSYSTEM

Weak innovation and capital investment has held back productivity growth

Average annual labour productivity growth, %, 2010-2019

Note: 2020 is excluded to abstract from the impact of the COVID-19 pandemic on the long-run estimates of productivity growth.

Source: OECD (2021), Compendium of productivity Indicators.

Despite the recent increase, R&D spending remains below earlier peaks

Gross domestic R&D spending

(database).

Business-based R&D is concentrated in the ICT sector

%

50

40

Business-based 10

spending on ICT as share of total business-based R&D spending 20

60 ESP HUNMEX DNK AUS BEL GRCDEU GBR ITA PRT JPN LTU ISL SWE AUT POL CZE NOR IRL USA FIN TUR EST KOR ISR

30

Tertiary educational attainment among young adults is relatively low

Note: Data refer to 2020 for Chile

Source: OECD (2022), Education at a Glance 2022.

Finland is not making the best of skilled migrants

Employment rate of foreign-born workers with high educational attainment as a share of that of the highly educated native-born, 2019

Source: OECD International Migration Database.

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