The second wave of corona may also hit the Finnish economy hard. What should we do? This was the topic at the first event of the Economic First Aid Course held on Wednesday 19 August at the Valkoinen Sali (White Room) venue in downtown Helsinki. Amid the corona crisis, this year’s event was called the Economic First Aid Course and held online without a guest audience. A live broadcast of the event was available via HS.fi. Aalto University Executive Education (Aalto EE) and Helsingin Sanomat have been organising the Economic Defence Course since 2015, which makes this the sixth course. The cooperating partner was K Group.
Professor Teemu Malmi spoke at the event as a representative of Aalto University and the School of Business.
‘The economic situation looks quite dark at this time. The pandemic will reduce tax revenue and increase public expenditure, thus causing a significant rise in government debt. According to the State Treasury, the government’s net borrowing is nearly 19 billion euros this year and government debt totalled 124 billion euros at the end of July. The debt level of municipalities is also increasing significantly this year.’
‘Debt at the end of 2019 totalled 106 billion, which was equal to approximately 44% of our GDP. According to Ministry of Finance forecasts, the ratio between debt and GDP will increase to 70% this year. The Ministry of Finance’s budget proposal for next year shows a deficit of 7 billion euros, meaning that a lot more money will also be borrowed next year. The pandemic may make it necessary to borrow even more.’
According to Professor Malmi, taking on more debt is not a major problem at the moment because interest rates are so low. ‘However, we don’t know how long this period of negative interest rates will continue. Any interest that we pay on debt means less money is available for financing welfare society services. At some point, we have to balance the economy and, over a longer period of time, government revenue and expenditure should be more or less equal in order to preserve economic sovereignty and ensure a good level of services for citizens.’
The pandemic has had a negative impact on employment. According to Statistics Finland, 87 000 fewer people were employed this June in comparison to one year ago, while 223 000 were unemployed and 117 000 laid off.
If the Government's pre-corona goal was to increase the number of people employed by tens of thousands, there is now a far greater need for work and measures to improve employment in comparison to the previous plans.
Indebtedness and employment are not the only challenges
Professor Malmi listed the many challenges that Finland is facing. ‘Our economy has grown slower than in reference countries, such as Sweden and Germany, and the international competitiveness of our businesses is not at the desired level. Our corporate structure is unhealthy, because we have a shortage of growing and successful medium-sized companies. Labour productivity has developed very slowly, our population is ageing and the dependency ratio is weakening. People are moving away from rural areas, while growth centres need to invest in homes and infrastructure. Digitalisation is changing the nature of work and the need for lifelong learning is growing. Of course, we also have to remember the challenges associated with climate change. It’s important to understand that the more successful our businesses are, the better we’ll be able to safeguard the well-being of our citizens.’
‘One way to succeed in international competition is to produce the same services as everyone else – but at a lower price. Of course, Finnish companies have to be cost-competitive, but very few of our companies can compete in this way. Another possibility is to produce innovative products, with Nokia and Supercell serving as good examples in this area. We can succeed if companies have good ideas that they are able to implement. Education and competence are the foundation for new ideas,’ explained Teemu Malmi.
‘I therefore challenge politicians to consider how we as society can support the creation of ideas and innovations in Finland. What does this mean in terms of education policy or R&D investments or, for example, attracting international labour and investments? Finland is also a promised land with regard to different reports and plans. I’m concerned about the slowness of decision-making and implementation. Something that is well planned is still just a plan. We have to make our political decision-making more agile and faster.’
The programme at the event also included three political pairs who debated on current topics, and presentations by Juha Peltola, Managing Partner at Vaaka Partners and Mikko Helander, President and CEO of K Group.
The second part of the Economic First Aid Course will be held on Thursday 24 September. Stimulation will be the theme at that time, and that event will also be broadcast live on HS.fi.
Text: Terhi Ollikainen