Juha Kilponen's (the Head of the Forecasting) presentation at the press conference held on 10 December 2015.

1. Julkinen
Suomen Pankki
Economic Outlook 2015-2017
Euro & talous 10 December 2015
1
Juha Kilponen

2. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Economic situation for Finland continues
to be difficult
 Economic growth in Finland will be among the
weakest in the euro area in the forecast period
 Finland’s export market dynamics weaker than
previously forecast
 Productivity growth will remain very slow, with no
improvement in competitiveness
 No significant correction in the general
government balance
2Juha Kilponen

3. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Growth will remain subdued
Juha Kilponen 3
Real GDP, %
December June
2014f: -0.4 -0.1
2015f: -0.1 0.2
2016f: 0.7 1.2
2017f: 1.0 1.3
-10
-5
0
5
10
120
140
160
180
200
220
1999 2002 2005 2008 2011 2014 2017
% change on previous year (right-hand scale)
At reference year (2010) prices (left-hand scale)
EUR bn %
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Real GDP

4. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Euro area growth broadly based;
Finland will fall behind
4Juha Kilponen
Real GDP, %
Finland (BoF) Euro area (ECB)
2014: -0.4 0.9
2015f: -0.1 1.5
2016f: 0.7 1.7
2017f: 1.0 1.9
90
100
110
120
130
140
1999 2004 2009 2014
Finland Euro area
Index, 1999Q1 = 100
Real, GDP
Forecasts: Bank of Finland (Finland) and European Central Bank ( euro area).
Sources: Statistics Finland, Eurostat, Bank of Finland and ECB
32353

5. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Frail growth dependent on domestic
demand
Juha Kilponen 5
-4
-2
0
2
4
6
2011 2012 2013 2014 2015 2016 2017
Net exports Private consumption
Public sector demand Private investment
Inventory change and
statistical discrepancies
% change in GDP volume
The chart is merely indicative. The GDP growth contribution of each demand
item has been calculated on the basis of its volume growth and its value share
in the previous year. The figures for 2015–2017 are forecasts.
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Contributions to growth, components of aggregate demand
% points

6. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Real income growth will sustain consumption
6Juha Kilponen
Real private consumption, %
December June
2014: 0.5 -0.2
2015f: 0.5 0.2
2016f: 0.6 0.4
2017f: 0.6 0.7
-4
-2
0
2
4
6
2010 2012 2014 2016
%
Savings ratio
Housholds' real disposable income*
Real private consumption*
Households = households and non-profit institutions serving households.
* % change from previous year
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Household's disposable income, consumption and savings

7. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Investment recovers slowly
– investment rate remains low
7Juha Kilponen
Private investment, %
December June
2014: -3.9 -6.5
2015f: -1.1 -2.5
2016f: 3.3 2.7
2017f: 2.8 2.2
80
90
100
110
120
130
140
2000 2005 2010 2015
Private investment
Private investment excl. housing construction
Housing construction
Index, 2000 = 100
Sources: Statistics Finland and Bank of Finland.
10 December 2015
bofbulletin.fi
Slight upturn of investments

8. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
What explains investment growth?
8Juha Kilponen
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
2011 2012 2013 2014 2015 2016 2017
Financing Fiscal policy Domestic demand
Monetary policy Foreign factors Price margins
Productivity Other Private investement, %
%, trend deviation
Source: Bank of Finland calculations.

9. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Foreign trade and external balance
Juha Kilponen 9

10. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
The recovery of exports delayed
10Juha Kilponen
Exports, %
December June
2014: -0.7 -0.4
2015f: 0.1 0.6
2016f: 2.1 3.3
2017f: 2.7 4.0
80
90
100
110
120
130
2007 2009 2011 2013 2015 2017
Exports Imports Export markets
Index, 2007 = 100
Source: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Developments in Finnish exports, imports and
export markets

11. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Forest industry still one of the pillars of
foreign trade
Juha Kilponen 11
-2 500
-2 000
-1 500
-1 000
-500
500
1 000
1 500
2 000
2 500
1989 1994 1999 2004 2009 2014
EUR million per month
Converted into 2014 euros using the GDP deflator; data-smoothing by the HP filter.
Sources: Finnish Customs and calculations by the Bank of Finland.
10 December 2015
bofbulletin.fi
Finland's trade balance by goods category
Wood and paper products
Computers and electronic equipment
Machinery and equipment
Basic metals and metal products
Refined oil products
Crude oil and natural gas
Other
Metallic minerals
Foods
Transport equipment

12. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Labour market
Juha Kilponen 13

13. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Labour market decline bottomed out
Juha Kilponen 14
Unemployment rate, %
December June
2014f: 8.7 8.7
2015f: 9.4 9.1
2016f: 9.2 8.9
2017f: 9.1 8.6
4
6
8
10
12
2 200
2 300
2 400
2 500
2 600
2005 2010 2015
Number of employed (left-hand scale)
Unemployment rate (right-hand scale)
1,000 persons %
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Unemployment and employed population, trend

14. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Wages and prices
Juha Kilponen 15

15. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Inflation sluggish
Juha Kilponen 16
HICP, %
December June
2014: 1.2 1.2
2015f: -0.1 0.2
2016f: 0.3 1.0
2017f: 1.0 1.5
-2
-1
0
1
2
3
4
5
2008 2010 2012 2014 2016 2018
Foodstuffs
Energy
Services and industrial goods excl. energy
Inflation
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Components of HICP inflation

16. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Differences in Finnish and euro area inflation
partly explained by increases in indirect
taxation
17Juha Kilponen
-1
0
1
2
3
4
2005 2007 2009 2011 2013 2015
Finland Euro area
Cumulative effect of changes in taxation on the consumer price index since 2005,
%
Source: European Central Bank.
10 Dec 2015
bofbulletin.fi

17. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Slow growth in wages and labour
productivity
Juha Kilponen 18
Compensation per
employee and productivity,
%
Compensation
per employee Productivity
2014: 1.4 0.0
2015f: 1.8 0.2
2016f: 1.4 0.3
2017f: 1.5 0.5
-6
-4
-2
0
2
4
6
8
10
2003 2005 2007 2009 2011 2013 2015 2017
Compensation per employee
Unit labour costs
Productivity per person employed
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
Productivity and wage developments
Prosenttimuutos edellisestä vuodesta

18. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Public finances
Juha Kilponen 19

19. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Public finances will barely improve
Juha Kilponen 20
-8
-6
-4
-2
0
2
4
6
8
1999 2004 2009 2014
Social security funds
Central government and local government
Total general government
General government net lending
Sources: Statistics Finland and Bank of Finland.
10 Dec 2015
bofbulletin.fi
% of GDP

20. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Debt will continue to grow at a rapid
pace – debt ratio will exceed 68%
Juha Kilponen 21
Debt ratio, %
December June
2014: 59.3 59.3
2015f: 62.8 62.5
2016f: 65.7 65.1
2017f: 68.1 67.3
40
42
44
46
48
0
20
40
60
80
1999 2004 2009 2014
General government EDP debt (left-hand scale)
Total tax ratio (right-hand scale)
% of GDP
Sources: Statistics Finland, State Treasury and Bank of Finland.
10 Dec 2015
bofbulletin.fi
General government debt and total tax ratio
%

21. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Risks and alternative scenario
Juha Kilponen 22

22. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Forecast risks more on the downside
 [-] Uncertainties in the global economy
 [+] Euro area demand may recover faster
than expected
 [-] In the domestic economy, the main risks
relate to economic policy and the labour
market
 Alternative scenario: Finnish exports fall
further behind export markets
Juha Kilponen 23

23. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Forecast summary
Juha Kilponen 24
Forecast summary
Percentage change on previous year
2014 2015f
2016f
2017f
2014 2015f 2016f 2017f
Gross domestic product -0.4 -0.1 0.7 1.0 Labour market
Private consumption 0.5 0.5 0.6 0.6 Hours worked -0.7 0.1 0.5 0.5
Public consumption -0.2 -0.1 0.6 0.6 Total employment -0.4 -0.3 0.4 0.4
Private fixed investment -3.9 -1.1 3.3 2.8 Unemployment rate, % 8.7 9.4 9.2 9.1
Public fixed investment -0.9 -2.3 1.3 1.4 Unit labour costs 1.4 1.7 1.1 1.0
Exports -0.7 0.1 2.1 2.7 Compensation per employee 1.4 1.8 1.4 1.5
Imports 0.0 -2.8 3.2 2.8 Productivity 0.0 0.2 0.3 0.5
Contributions to growth
Domestic demand -0.5 0.0 1.1 1.0 Gross domestic product deflator 1.6 0.5 1.0 1.0
Net exports -0.3 1.1 -0.4 0.0 Private consumption deflator 1.6 0.2 0.4 1.0
Inventory change + statistical discrepancy 0.4 -1.2 0.1 0.0
Household saving ratio, % -0.3 0.1 0.6 0.7 Harmonised index of consumer prices 1.2 -0.1 0.3 1.0
Excluding energy 1.5 0.3 0.5 0.8
Current account, % of GDP -0.9 -0.1 -0.2 -0.3 Energy -1.7 -5.8 -1.8 3.6
f = forecast
Sources: Statistics Finland and Bank of Finland.

24. Suomen Pankki – Finlands Bank – Bank of Finland Julkinen
Thank you
Juha Kilponen 25