Municipal Finance forecasts that gross domestic product (GDP) will shrink by seven percent this year. Next year, it will grow by three percent.
- Although it [three percent] seems to be quite moderate growth, it must be remembered that this is a very large and deep pit that will take a long time to rise, Timo Vesala, Chief Economist of Municipal Finance, said at the economic review.
- Although I do not believe in a lost decade from this sitting per se, the realism is to expect that the 2019 GDP level will hardly be reached before 2023.
According to Municipal Finance, the risk of an industrial export shock, "stern wave", is higher than average for Finland.
Next year, growth will be driven by private consumption and foreign trade. The forecast is based on the assumption that the production base was bypassed in April – May and that there will be no more country-wide restrictions.
The gloom of the economy probably coincided with April, when the closure measures were at their strongest. Consumer demand has already begun to recover during the second quarter.
- The problems in the industry will not be strongest until the autumn and are likely to spread to next year as well. On the investment side, the recovery is slowest.
In construction investments, the bottoms will not be crossed until next year.
Annual margins weakened
Esa Kallio, CEO of Municipal Finance, said that the hardest blow from the corona has been taken by those municipalities and cities that mainly finance their operations with tax revenues and not with state contributions.
- In the cityscape, it means large growing areas. They are also the areas that are under strong investment programs and migration is underway.
On the other hand, Korona is causing a new blow to the economy of municipalities that were already in a difficult economic situation, from which it is even more difficult to recover.
Overall, the annual margin of the associations of municipalities has clearly weakened due to the loss of income in the hospital districts through the postponement of non-emergency care, but the preparation for the coronavirus has significantly increased costs.
The Board of Directors the draft budget Kallio would like to thank the municipal sector side of the appropriations intended to increase approximately billion to almost 1.5 billion. Subsidies for non-profit housing and the development of public transport are also positive.
The government increased the share of corporate taxes paid by companies to municipalities, but on the other hand, it is not known how much Korona will reduce their turnover this year. The government intends to increase corporate tax revenue by ten percentage points and reduce the state's share of distribution accordingly.
The change will reduce state tax revenue by EUR 410 million this year and increase municipal tax revenue by the same amount.