According to OECD's Economic Outlook, growth in the OECD area has resumed after the most virulent recession in decades. The recovery is driven by exceptionally strong demand-supporting policy measures, public interventions to restart credit markets and ease funding of financial institutions, a strong pick-up in demand in the non-OECD area and a positive contribution from inventory adjustment.
Notwithstanding the support to growth in the coming two years from recent and assumed future improvements in financial conditions, the continued need to strengthen financial institutions, on-going private sector balance sheet adjustment and waning macroeconomic policy support are likely to imply a moderate recovery. Area-wide unemployment is set to continue to rise well into 2010 and to fall only marginally in 2011 from a peak of above 9% of the labour force. The exceptional slack in the economy will push down underlying inflation further to very low levels in several countries, though only a few will experience falling price levels.
In this environment, it will be a challenge to start unwinding crisis-induced policies in an orderly and coherent way. Key issues include the timing, pace and modalities of withdrawing extraordinary stimulus. Other issues include elaborating strategies to move towards fiscal sustainability, ensuring financial stabilisation while phasing out crisis measures, putting in place an improved financial regulatory framework and strengthening the growth potential of the economy.
As for country specific economic situation and recommendations for Finland, the Outlook states that the Finnish economy has suffered one of the largest declines in activity in the OECD, driven by its exposure to international trade in manufactures. However, a recovery should get underway by the end of 2009 with bounce in exports from the current very low levels. While some reconsolidation measures have been announced, a coherent plan for a substantial fiscal consolidation should be articulated as soon as possible, and put in place once the recovery is on a firm footing.
Further information: Mr. Hannu Jokinen, Counsellor, tel. +33 (0)1 45 24 71 71, hannu.jokinen@formin.fi
More information on OECD's website www.oecd.org/OECDEconomicOutlook
