Leif Fagernäs: The Finnish Economic Situation and Challenges Finnland-Österreich Wirtschaftsklub Suomi-Itävalta Liikemiesklubi Jahresversammlung

LF/mt 2 Main Economic Forecasts (ETLA)

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LF/mt 4 GDP, index 1995 = 100 Source: OECD

LF/mt 5 Industrial production, index 1990 = 100

LF/mt 6 Productivity by Branch Source: Statistics Finland Labour productivity, index 1985 = 100

LF/mt 7 Public Sector Balance, % of GDP

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LF/mt 9 WEF Clobal Competitiveness Index 2006 Finland´s ranking (out of 125) in various areas

LF/mt 10 Source;: WEF

LF/mt 11 Economic situation Short terms prospects good Problems in making full use of growth opportunities –Shortage of qualified labour –Slow growth of fixed investments Impediments to growth will increase in the near future –Ageing –Slower productivity growth –Increasing difficulties in raising employment –Strained public finances –Supply and price of energy Good short term prospects do not remove the need for structural reforms

LF/mt 12 The Supply of Labour Decreases Source: The Finnish Centre for Pensions

LF/mt 13 Lähde: OECD Economic Outlook, No 77, 2005 Finland has not been an Attractive Investment Target Fixed Business Investment 1990 – 2006

LF/mt 14 Stock of Direct Investments, EUR billion

LF/mt 15 Consumer Prices

LF/mt 16 Key factors for growth and competitive business environment - challenges of the new government Reduction of taxes to increase work and employment Strengthening of know-how and competencies Renewal of innovation policies More and successful entrepreneurs Functioning labour market Availability of energy at reasonable price and mitigating climate change

LF/mt 17 Source: OECD

LF/mt 18 Taxation Increase supply and demand of labour Lower income tax in all wage categories Reduction of highest marginal tax to 50 per cent Competitive corporate tax Equitable taxation of dividends Abolition of inheritance tax of corporate property

LF/mt 19 International Tax Comparison 2005 Income Tax Percentages in Finland and in 13 Other European Countries, Average Single employee Euroopan maat: Alankomaat, Belgia, Espanja, Iso-Britannia, Italia, Itävalta, Norja, Ranska, Ruotsi, Saksa, Sveitsi, Tanska ja Viro.

LF/mt 20 Share of High Technology of Exports, % R&D-intensity, % R&D Expenditure in Relation to Value Added and the Share of High Technology of Exports Lähde: TEKES, OECD, Science, Technology and Industry Scoreboard 2003

LF/mt 21 Innovation policies Increase investments in R&D by 7 per cent annually –Strategic competencies centers –Commercialisation of technological innovations Renew the research structures –Stronger universities Concentration on key areas, economic autonomy, reform of administration Incentives for venture capital in growing SMEs

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LF/mt 23 Willingness to Become an Entrepreneur % Source: Flash Eurobarometer 160, 2004 Survey is Based on telephone interviews

LF/mt 24 Functioning labour market More flexibility in collective agreements –Wage rises and working-time arrangements decided on company level Availability of qualified labour –Vocational training to respond to the needs –Better regional mobility –Removal of unemployment traps –Increase of work-based immigration Social security to encourage employment –Reform of unemployment benefits Better labour peace

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LF/mt 26 Sustainable energy policy Need for electricity will grow by per cent by 2020 Favourable conditions for diversified energy production –in particular emission free energy, including nuclear power Strategy for the use of biomass for energy and industry Reduction of electricity tax Global climate policy –Level playing field –Rewards for energy efficiency

LF/mt 27 Electricity Supply by Energy Sources 2006 Total 90,0 TWh Hydro power 12,6 % Wind power 0,2 % Peat 6,9 % Biofuel 11,3 % Nuclear power 24,4 % Natural gas 10,9 % Coal 17,9 % Oil 2,0 % Net imports 12,7 % Waste fuels 1,1 % Source: Finnish Energy Industries

LF/mt 28 World GHG Emissions Source: European Commission