Finland may lose its competitive edge compared to other nearby countries after the coronavirus crisis, warns an article published by the Bank of Finland on Wednesday.
According to Bank of Finland adviser Lauri Kajanoja, the price of labour in Finland increased between 2019 and 2021 in relation to the eurozone average.
If the price of labour continues to rise in Finland in relation to its main trading partner countries without a corresponding increase in long-term productivity compared to its rivals, the outlook for exports and employment will deteriorate, Kajanoja said.
In the pre-Covid years of 2018 and 2019, Finland’s cost competitiveness remained broadly unchanged, after improving considerably in 2016 and 2017.
The centre-right government led by PM Juha Sipilä (Cen) in 2015-2019 introduced controversial measures aimed at boosting competitiveness and attracting more foreign corporate investment.
Outpacing the eurozone average
“Productivity developments during the coronavirus crisis in Finland have been stronger than the eurozone average, but according to forecasts, this difference will level off as the coronavirus crisis gradually recedes,” Kajanoja said.
“If this happens, Finland’s cost competitiveness may weaken. Much also depends on what working conditions are agreed in the coming months,” he added, referring to the autumn rounds of collective agreement negotiations.
Kajanoja, who is responsible for advising the central bank’s board on domestic economic policy issues, was previously an economic analyst for the European Commission and the European Central Bank.
Comments are closed, but trackbacks and pingbacks are open.