With relatively modest inflation, Finland no longer so expensive by EU standards

When the only foreign money, the euro, was launched greater than 20 years in the past, the buying energy of individuals in Finland was among the many EU’s weakest, together with these in Spain, Portugal and Greece.

Since then, relative buying energy has improved as costs have risen much less right here than elsewhere, say economists.

Since the flip of the millennium, the buying energy of Finns in relation to different Europeans has improved. Wage ranges have risen, whereas inflation has been slower than elsewhere.

While Finland faces its highest inflation in a few years, costs at the moment are rising a lot quicker in the remainder of the euro space than right here.

That implies that the buying energy of individuals in Finland is enhancing relative to many different European international locations that have been beforehand extra expensive, Bank of Finland economist Aino Silvo informed Yle.

According to the EU statistical workplace Eurostat, Finnish shopper costs rose at an annual price of 5.6 % in March.

Meanwhile in Spain, for instance, inflation was climbing at an annual price of just about 10 %, the Netherlands by practically 12 %.

In the close by Baltics, Estonian costs rose at an annual price of 14.8 %, Latvia’s by 11.2 % – whereas Lithuania clocked the eurozone’s highest price at 15.6 %.

Euro space annual inflation was estimated at 7.5 % in March, up from lower than six % in February, in response to Eurostat.

The rise in shopper costs was primarily pushed by sharply increased power prices following the Russian assault on Ukraine in late February.

However, Silvo mentioned it’s unlikely that the present state of affairs will considerably alter long-term traits.

“I don’t think that the period when the inflation rates differ sharply between countries will last so long,” she mentioned.

However, Finland should still overtake Germany, for instance, in residing standards and buying energy measures this yr, she instructed. In phrases of residing standards, Germany has solely been barely forward of Finland in recent times.

At the present price, Finland can be catching up with different affluent eurozone international locations when it comes to buying energy, such because the Netherlands, the place costs are rising a lot quicker than earlier than.

Although Finland’s relative place is enhancing, it is very important keep in mind that the buying energy of residents right here is quickly declining attributable to inflation, Silvo emphasised.

“The position of everyone may deteriorate, but some less than others, and Finland may be among [those who survive] best if inflation does not accelerate as much here as elsewhere,” she defined.

“If Switzerland, Norway or Luxembourg seem expensive to tourists, that’s because the locals’ salaries are clearly higher than ours,” famous Harri Kananoja, a senior statistician at Statistics Finland.

According to Sakari Lähdemäki, Forecast Manager on the Labour Institute for Economic Research (Labore), reasonable wage settlements could also be one rationalization for why inflation has been slower in Finland than in the remainder of the eurozone.

During the 2008 monetary disaster, wage progress continued to be robust right here regardless of the stagnation of the economic system. Since then, in response to Lähdemäki, wage progress has “calmed down”.

“Time will tell how the accelerated inflation will impact wage negotiations, but there are reasons to maintain the moderate line, because in our opinion, 2022 is an exceptional year for inflation,” Lähdemäki argued.