Finland's finance ministry on Friday raised the economic growth forecast for this year to 2.1% from March's 1.1%, citing higher demand.
In its latest Economic Survey report, the ministry said stock orders and output expectations in industry have risen and housing construction has rebounded. Given the gradual recovery in the labor market, household consumption growth is expected to improve. The ministry expects overall consumption to increase nearly 2% from last year.
The growth forecast for 2011 was also lifted to 2.9% from 2.1%. However, the growth rate is projected to drop to 2.6% in 2012.
"Economic growth is being fueled mainly by strong growth in exports and a recovery in private investment. At the end of the forecast period, total output will still be a little more than one per cent below the peak figures of 2008," the ministry said. "Manufacturing will also fall short of its previous record level."
Further, the report said Finland's budget deficit will slightly exceed the 3% threshold specified in the Stability and Growth Pact. Deficit is forecast at 3.3% of gross domestic product this year and 1.4% in 2011. "With the increases in VAT rates and energy taxes and higher taxes on sweets and soft drinks being introduced, fiscal policy is moving away from a stimulatory strategy towards a more restrictive stance," the ministry said.
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