By Sakari Suoninen
HELSINKI, Aug 27 (Reuters) – Finland said it now expects its
economy to flatline this year, trimming a previous forecast for
slight growth, and could take on more debt as the impact of the
Ukraine crisis hampers its recovery.
Russia is one of Finland’s biggest export markets and the
conflict between Russia and Ukraine, which has weakened the
Russian economy and triggered tit-for-tat sanctions by Russia
and the West is hurting the Finnish economy.
The government, which kicked off two days of budget talks on
Wednesday, said it saw a flat gross domestic product (GDP) for
2014 and expected debt-to-GDP to break the EU limit of 60
percent during the next year, but declined to specify the
updated forecasts further.
In June it had forecast GDP growth of 0.2 percent this year
and 1.4 percent in 2015.
“The economic situation has deteriorated and will
deteriorate further, which will have an impact on the budget
decisions,” Prime Minister Alexander Stubb told a news
conference.
“Whether this will lead to taking more debt, that we will
see tomorrow,” he said.
Sources told Reuters earlier that the five-party government
expects 2015 state revenues to be around 500 million euros ($660
million) less than previously anticipated.
The finance ministry earlier this month proposed a 4 billion
euro central government deficit for 2015, down from an estimated
2014 gap of 7 billion euros.
Finland’s GDP has yet to return to 2008 levels as the euro
zone debt crisis, together with declines at the country’s key
industries — mobile phones and paper — cut its exports.
The Ukraine crisis is the latest headache for the economy,
which pulled out of recession in the second quarter but only
grew 0.1 percent from the previous quarter.
The government added that Russia’s import ban on Western
food products would only cut about 0.1 percent from Finland’s
GDP this year. However, economists say weak Russian consumer
demand will hurt other Finnish exports.
The government has since 2011 agreed to cut spending and
raise taxes by 7 billion euros to keep deficits in check and
protect the economy’s triple-A credit ratings.
($1 = 0.7587 euro)
(Reporting By Jussi Rosendahl and Sakari Suoninen; Editing by
Jeremy Gaunt and Susan Fenton)
