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www.oecd.org/eco/surveys/economic-survey-finland.htm
@OECD
@OECDeconomy
2016 OECD ECONOMIC
SURVEY OF FINLAND
Mari Kiviniem...
The economy is weak
2
Source: OECD Economic Outlook database.
60
70
80
90
100
110
120
1991 1995 1999 2003 2007 2011 2015
2...
Export performance has fallen
3
Source: OECD Economic Outlook database.
70
75
80
85
90
95
100
105
-2
-1
0
1
2
3
4
5
2005 2...
Productivity needs to be revived and
competitiveness restored
4
Source: OECD National Accounts database.
75
100
125
150
17...
Productivity in business services
has been sluggish
5
Source: OECD National Accounts database.
75
100
125
150
175
200
225
...
Boosting employment is essential
6
Source: OECD Labour Force Statistics database.
60
63
66
69
72
75
78
60
63
66
69
72
75
7...
Key messages
o Public finances need to be consolidated at a gradual
pace to preserve the incipient recovery.
o Boosting pr...
www.oecd.org/eco/surveys/economic-survey-finland.htm
Finland’s Challenges for
Growth—Are they Different?
2016 OECD ECONOMI...
Main Findings
o Reviving productivity and increasing employment are essential to counter
a weak economy, rising public deb...
Main Findings (cont.)
o Labour taxation is high.
o The combination of generous benefits, long duration and late activation...
The Good News: Well-being remains high
11
Source: OECD Better Life Index 2015 database.
Healthstatus
Jobsandearnings
Housi...
The Good News: Income inequality is low
12
Source: OECD Income Distribution and Poverty database.
0.00
0.05
0.10
0.15
0.20...
THE CHALLENGES
ARE THEY DIFFERENT?
13
The economy is weak
and Finland is in a worse situation
14
Source: OECD Economic Outlook database.
60
70
80
90
100
110
120...
Investment is falling
similar to Euro area, but not Sweden
15
Source: OECD Economic Outlook database.
Electronics and forestry pull down GDP and
weaken participation in GVCs
16
Source: OECD TiVA database.
Economic weakness in Russia further
depresses exports
17
Source: UN Comtrade database.
Falling manufacturing exports are not
compensated by services
18
Source: OECD Main Economic Indicators database.
Current a...
Labour productivity growth has stalled
but this is a common trend
19
Source: OECD National Accounts database.
95
105
115
1...
Productivity in business services
has been sluggish
20
Source: OECD National Accounts database.
75
100
125
150
175
200
225...
Wages have outpaced productivity
and Finland faces a bigger challenge
21
Source: OECD Productivity and Economic Outlook da...
Employment is low
and Finland compares poorly to other Nordics
22
Source: OECD Labour Force Statistics database.
Employmen...
Government spending as a share of GDP is
the highest in the OECD
23
Source: OECD Economic Outlook database.
0
10
20
30
40
...
REVIVING PRODUCTIVITY
24
Multifactor productivity in Finland:
from outstanding to under-performing
25
Source: OECD Productivity database.
-2 -1 0 1...
Catching up with the frontier:
Finland has better framework conditions than most
26
Source: Saia, A., et al. (2015), "Prod...
Labour market matching
Finland could do better on market regulations
27
Source: Adalet McGowan, M and D. Andrews (2015), “...
Product market regulations
Finland could do better; but about on par with other Nordics
28
Source: OECD Product Market Reg...
Regulation tightness varies across sectors
Finland more regulated than best performer
29
Source: OECD Product Market Regul...
Young SMEs and job creation
Finland situation needs to improve
30
Source: Criscuolo, Gal and Menon (2014).
0
10
20
30
40
5...
Business and government R&D
Finland is scaling down; others are scaling up
31Source: OECD, Main Science and Technology Ind...
Key Recommendations on structural reforms
and innovation policies to boost productivity
 Streamline regulations in retail...
BOOSTING EMPLOYMENT
THE BIGGEST CHALLENGE
33
The tax wedge on labour
Finland’s is high, but similar to other Nordics
34
Source: OECD Taxing wages database.
2013
Unemployment benefits
Finland’s taper much more slowly
35
Source: OECD Tax Benefits Models.
2013
Activation policies
Finland needs to step-up to be similar to other Nordics
36
Source: OECD Labour Market Statistics datab...
Disability and unemployment benefits
Promote early retirement; new policy opens new route
37
Source: Finnish Centre for Pe...
Compressed wage distribution
reduces employment for the low-skilled
38
Source: OECD Skills Outlook 2013.
A generous home-care allowance
reduces work incentives of young women
39
Source: OECD Survey of Adult Skills, 2012.
Employ...
Foundation skills are relatively low for
vocational education and training graduates
40
Source: Pareliussen, J. (2016), “A...
Key Recommendations to increase
employment and enhance skills
 Reduce taxes on labour.
 Reduce the duration of the home-...
Meeting the Fiscal Challenge
42
Source: OECD Calculations.
Gross government debt scenarios
0
50
100
150
200
250
0
50
100
1...
More Information…
www.oecd.org/eco/surveys/economic-survey-finland.htm
Disclaimers:
The statistical data for Israel are su...
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Finlands challenges-for-growth-oecd-economic-survey-2016

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Main findings and recommendations from the 2016 OECD Economic Survey of Finland

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Finlands challenges-for-growth-oecd-economic-survey-2016

  1. 1. www.oecd.org/eco/surveys/economic-survey-finland.htm @OECD @OECDeconomy 2016 OECD ECONOMIC SURVEY OF FINLAND Mari Kiviniemi Deputy Secretary General Helsinki, 28 January 2016
  2. 2. The economy is weak 2 Source: OECD Economic Outlook database. 60 70 80 90 100 110 120 1991 1995 1999 2003 2007 2011 2015 2005=100 Real GDP Finland Other Nordics Euro area 0 2 4 6 8 10 12 14 16 18 20 1991 1995 1999 2003 2007 2011 2015 % Unemployment rate Finland Other Nordics Euro area
  3. 3. Export performance has fallen 3 Source: OECD Economic Outlook database. 70 75 80 85 90 95 100 105 -2 -1 0 1 2 3 4 5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005=100% of GDP Current account balance (lhs) Export performance (rhs) 1. Ratio of exports to export markets (trade-weighted average of trading partners' imports). A decrease indicates a loss in export market shares. 1
  4. 4. Productivity needs to be revived and competitiveness restored 4 Source: OECD National Accounts database. 75 100 125 150 175 200 225 75 100 125 150 175 200 225 1997 2001 2005 2009 2013 Level in 1997=100Level in 1997=100 Manufacturing Business services
  5. 5. Productivity in business services has been sluggish 5 Source: OECD National Accounts database. 75 100 125 150 175 200 225 75 100 125 150 175 200 225 1997 2001 2005 2009 2013 1997=1001997=100 Manufacturing Germany Denmark Finland 95 105 115 125 135 95 105 115 125 135 1997 2001 2005 2009 2013 1997=1001997=100 Business services United Kingdom Sweden Norway
  6. 6. Boosting employment is essential 6 Source: OECD Labour Force Statistics database. 60 63 66 69 72 75 78 60 63 66 69 72 75 78 OECD Finland Denmark Sweden Norway Employment rate (in %, 2014) Employment rate (in %, 2014)
  7. 7. Key messages o Public finances need to be consolidated at a gradual pace to preserve the incipient recovery. o Boosting productivity growth, by improving framework conditions and supporting innovation, is necessary to raise living standards and well-being for all. o Raising employment, through further investing in workers’ skills and enhancing labour market flexibility and work incentives is necessary to boost inclusive growth. 7
  8. 8. www.oecd.org/eco/surveys/economic-survey-finland.htm Finland’s Challenges for Growth—Are they Different? 2016 OECD ECONOMIC SURVEY OF FINLAND Catherine L. Mann Chief Economist @OECD @OECDeconomy
  9. 9. Main Findings o Reviving productivity and increasing employment are essential to counter a weak economy, rising public debt and the highest level of government spending in the OECD. o Product market regulations are restrictive in retail trade, transport and construction. o Start-up creation and growth of young firms are weak. Co-operation between business and universities is successful, but on a limited scale. 9
  10. 10. Main Findings (cont.) o Labour taxation is high. o The combination of generous benefits, long duration and late activation of the unemployed prolongs unemployment spells. o Unemployment and disability benefits are the two main routes to early retirement. A new pension scheme with a lower retirement age for those in mentally or physically demanding jobs may have the same effect. o The home care allowance reduces female labour force participation and enrolment in early childhood education. o Central wage bargaining coordinates wage increases according to the needs of exporting industries, but reduces labour market flexibility. o Narrow qualifications and a lack of foundation skills among vocational education and training graduates reduce adaptability to structural change. 10
  11. 11. The Good News: Well-being remains high 11 Source: OECD Better Life Index 2015 database. Healthstatus Jobsandearnings Housing Personalsecurity Work-lifebalance Civicengagement andgovernance Income Environmental quality Educationandskills Subjectivewell- being Socialconnections Countryrankings 20% top performers 60% middle performers 20% bottom performers Finland
  12. 12. The Good News: Income inequality is low 12 Source: OECD Income Distribution and Poverty database. 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50 DNK SVK SVN NOR CZE ISL FIN BEL SWE AUT NLD CHE HUN DEU POL KOR LUX IRL FRA CAN AUS ITA NZL ESP EST PRT GRC GBR ISR USA TUR MEX Gini coefficient post taxes and transfers, 2012 or latest year available
  13. 13. THE CHALLENGES ARE THEY DIFFERENT? 13
  14. 14. The economy is weak and Finland is in a worse situation 14 Source: OECD Economic Outlook database. 60 70 80 90 100 110 120 1991 1995 1999 2003 2007 2011 2015 2005=100 Real GDP Finland Other Nordics Euro area 0 2 4 6 8 10 12 14 16 18 20 1991 1995 1999 2003 2007 2011 2015 % Unemployment rate Finland Other Nordics Euro area
  15. 15. Investment is falling similar to Euro area, but not Sweden 15 Source: OECD Economic Outlook database.
  16. 16. Electronics and forestry pull down GDP and weaken participation in GVCs 16 Source: OECD TiVA database.
  17. 17. Economic weakness in Russia further depresses exports 17 Source: UN Comtrade database.
  18. 18. Falling manufacturing exports are not compensated by services 18 Source: OECD Main Economic Indicators database. Current account balance
  19. 19. Labour productivity growth has stalled but this is a common trend 19 Source: OECD National Accounts database. 95 105 115 125 135 95 105 115 125 135 1997 2001 2005 2009 2013 1997=1001997=100 Denmark Finland Sweden Germany
  20. 20. Productivity in business services has been sluggish 20 Source: OECD National Accounts database. 75 100 125 150 175 200 225 75 100 125 150 175 200 225 1997 2001 2005 2009 2013 1997=1001997=100 Manufacturing Germany Denmark Finland 95 105 115 125 135 95 105 115 125 135 1997 2001 2005 2009 2013 1997=1001997=100 Business services United Kingdom Sweden Norway
  21. 21. Wages have outpaced productivity and Finland faces a bigger challenge 21 Source: OECD Productivity and Economic Outlook databases. 80 90 100 110 120 130 2000 2002 2004 2006 2008 2010 2012 2014 2007=100 Labourproductivity and wages Labour productivity Wage rate 80 90 100 110 120 130 2000 2002 2004 2006 2008 2010 2012 2014 2007=100Unit labour cost Finland Sweden Germany Euro Area
  22. 22. Employment is low and Finland compares poorly to other Nordics 22 Source: OECD Labour Force Statistics database. Employment rate difference to the Nordic average, 2014 -25 -20 -15 -10 -5 0 5 Percentage points Women -25 -20 -15 -10 -5 0 5 Age 15-19 Age 20-24 Age 25-29 Age 30-34 Age 35-39 Age 40-44 Age 45-49 Age 50-54 Age 55-59 Age 60-64 Age 65-69 Age 70-74 Percentage points Men
  23. 23. Government spending as a share of GDP is the highest in the OECD 23 Source: OECD Economic Outlook database. 0 10 20 30 40 50 60 0 10 20 30 40 50 60 CHE AUS EST USA IRL CAN SVK POL LUX CZE ESP GBR DEU ISL NOR NLD PRT GRC SVN HUN ITA AUT SWE BEL DNK FRA FIN % of GDP% of GDP 2014
  24. 24. REVIVING PRODUCTIVITY 24
  25. 25. Multifactor productivity in Finland: from outstanding to under-performing 25 Source: OECD Productivity database. -2 -1 0 1 2 3 4 5 Italy Spain Denmark Portugal Belgium New Zealand Switzerland Netherlands Japan Australia Canada France Germany United Kingdom Austria Sweden Ireland Finland United States Korea Average annual growth, % 1997-2007 2007-2013
  26. 26. Catching up with the frontier: Finland has better framework conditions than most 26 Source: Saia, A., et al. (2015), "Productivity Spillovers from the Global Frontier and Public Policy: Industry-Level Evidence", OECD Economics Department Working Papers, No. 1238.
  27. 27. Labour market matching Finland could do better on market regulations 27 Source: Adalet McGowan, M and D. Andrews (2015), “Skill mismatch and public policy in OECD countries”, OECD Economics Department Working Paper, No. 1210.
  28. 28. Product market regulations Finland could do better; but about on par with other Nordics 28 Source: OECD Product Market Regulation database. 2013
  29. 29. Regulation tightness varies across sectors Finland more regulated than best performer 29 Source: OECD Product Market Regulation database. 2013 Intl trade e-commerce
  30. 30. Young SMEs and job creation Finland situation needs to improve 30 Source: Criscuolo, Gal and Menon (2014). 0 10 20 30 40 50 60 0 10 20 30 40 50 60 ESP NZL HUN PRT LUX NLD AUT ITA FRA BEL CAN SWE GBR NOR USA JPN FIN %% 2001-2011
  31. 31. Business and government R&D Finland is scaling down; others are scaling up 31Source: OECD, Main Science and Technology Indicators database and Statistics Finland. 90 100 110 120 130 90 100 110 120 130 2007 2008 2009 2010 2011 2012 2013 2007=1002007=100 Gross expenditure on R&D (constant USD PPP) Germany OECD Sweden Finland 80 90 100 110 120 80 90 100 110 120 2007 2008 2009 2010 2011 2012 2013 2014 2007=1002007=100 Government-funded R&D in Finland Total government R&D Universities Tekes
  32. 32. Key Recommendations on structural reforms and innovation policies to boost productivity  Streamline regulations in retail trade, transport and construction.  Shift taxes towards recurrent taxes on personal immovable property and indirect taxes.  Reinforce co-operation between companies, particularly start-ups, and universities. 32
  33. 33. BOOSTING EMPLOYMENT THE BIGGEST CHALLENGE 33
  34. 34. The tax wedge on labour Finland’s is high, but similar to other Nordics 34 Source: OECD Taxing wages database. 2013
  35. 35. Unemployment benefits Finland’s taper much more slowly 35 Source: OECD Tax Benefits Models. 2013
  36. 36. Activation policies Finland needs to step-up to be similar to other Nordics 36 Source: OECD Labour Market Statistics database. 2013
  37. 37. Disability and unemployment benefits Promote early retirement; new policy opens new route 37 Source: Finnish Centre for Pensions database. New retirees aged 50+ by type of pension
  38. 38. Compressed wage distribution reduces employment for the low-skilled 38 Source: OECD Skills Outlook 2013.
  39. 39. A generous home-care allowance reduces work incentives of young women 39 Source: OECD Survey of Adult Skills, 2012. Employment by gender, age and literacy proficiency
  40. 40. Foundation skills are relatively low for vocational education and training graduates 40 Source: Pareliussen, J. (2016), “Age, Skills and Labour Market Outcomes in Finland”, OECD Economics Department Working Papers, forthcoming. 0 10 20 30 40 50 60 0 10 20 30 40 50 60 Vocational Academic Vocational Academic Upper secondary Tertiary PIIAC score pointsPIAAC score points Literacy skills premium from education beyond lower secondary, 2012
  41. 41. Key Recommendations to increase employment and enhance skills  Reduce taxes on labour.  Reduce the duration of the home-care allowance.  Increase tapering of unemployment benefits and combine with early and systematic job-search and reporting.  Phase out the unemployment tunnel, tighten disability pensions and limit the new special pension scheme for those in demanding jobs.  Strengthen the state mediator and local unions to raise local flexibility in wage setting, without compromising competitiveness.  Strengthen foundation skills in vocational education and training. 41
  42. 42. Meeting the Fiscal Challenge 42 Source: OECD Calculations. Gross government debt scenarios 0 50 100 150 200 250 0 50 100 150 200 250 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 % of GDP% of GDP No policy action Pension reform Structural reforms Fiscal consolidation (€4bn 2016-19)
  43. 43. More Information… www.oecd.org/eco/surveys/economic-survey-finland.htm Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 43 @OECD @OECDeconomy

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