OECD Economic Surveys: Finland 2020
The COVID-19 pandemic has plunged Finland into a deep recession, albeit less severe than in most other OECD countries. Finland managed to bring the first wave of the coronavirus under control quickly through a combination of voluntary mobility reductions and timely containment measures and is on track to do the same for the second wave. Nevertheless, many people have been laid off and the budgetary costs of supporting household- and business incomes have been considerable. Once the recovery is underway, substantial consolidation measures will be needed to achieve the government’s objective of eliminating the structural budget deficit by the end of the decade. Closing routes to early retirement would make a large contribution to achieving this objective.
SPECIAL FEATURE: RAISING EMPLOYMENT
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Key policy insights
The COVID-19 pandemic has plunged Finland into its deepest recession since the early 1990s. Distancing (whether voluntary or obligatory), to limit the spread of the virus, drastically reduced supply, primarily in service sectors, many of which have frequent social interactions. Exports also fell sharply as Finland’s trading partners cut demand for its exports. The economic and social impact of this contraction has been substantial as services account for a high proportion of value added and tend to be labour intensive (Box 1.1). The number of people temporarily or permanently laid off amounted to 15% of the population aged 15-74 by mid-August and job opportunities for people entering the labour market, notably the young, and for the unemployed dried up. The ensuing labour market crisis has hit low-income households harder than high-income households, most of which switched to teleworking, had more secure employment contracts and were entitled to unemployment insurance benefits in the event of a layoff. Women also fared less well on average than men did (Helsinki Graduate School of Economics, 2020[1]).