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Thu, 28 Aug, 2014 12:06:31 AM Dairy sector feared to be worst affected FTimes Report, August 28  The Defense Ministers Carl Haglund, Finance Minister Antti Rinne, Prime Minister Alexander Stubb, environment minister Ville Niinistö and Interior Minister Päivi Räsänen at a press conference released the assessment report on economic impact due to sanctions and counter sanctions by the EU and Russia in Helsinki Government Palace on Wednesday. Photo – Lehtikuva. The economic effects of the sanctions and counter-sanctions imposed by the European Union and Russia against each other are expected to be limited, according to an assessment report.
The government on Wednesday released the report prepared by a working group formed on August 18 to assess the economic impacts of the EU’s Russia sanctions and Russia’s counter-sanctions on the Finnish economy before the budget session, said an official press release.
“Although the restrictive measures of the EU and other countries and Russia’s import ban will have significant effects on the outlook of certain companies and sectors, their direct effects on the overall economic activity of Russia and its trading partners will be minor,” said the report.
The Ministry of Finance, the Bank of Finland, the Ministry of Employment and the Economy, the Ministry of Agriculture and Forestry, the Ministry of Transport and Communications, the Ministry for Foreign Affairs, the Prime Minister’s Office and the Government Institute for Economic Research took part in the assessment.
According to the Bank of Finland’s analysis, Russia’s import ban will reduce Finland’s total output this year directly by around 0.1% while the Government Institute for Economic Research (VATT) put the percentage at 0.01.
When the general weakening of Russia’s economic development is taken into account, the Bank of Finland estimates that the negative impact on growth will be around 0.2% this year.
The report published today by the working group states that Russia’s economic growth has already slowed for reasons independent of the sanctions since 2013, and this has been reflected in Finland’s economic development.
In early August this year, Russia imposed an import ban on foodstuffs. As a result, Finland’s food exports to Russia will fall to less than a quarter of the normal. The biggest direct impact perceived is on the dairy sector, says the report.
According to the analysis of the Economics Department of the Ministry of Finance, the cumulative direct impact of Russia’s import ban on Finland’s GDP will be around 0.1% and very marginal on unemployment.
The weakening of Russia’s growth will reduce Finland’s total output in 2014-2015 by a total of around one half of one per cent and will increase the unemployment rate by the end of 2015 by around 0.2 percentage points relative to the December 2013 forecast.
The effects will be included in the forecast prepared as a basis for the budget proposal to be published on September 15.
Similar results were found in the assessments of the Ministry of Finance and the Bank of Finland on Russia’s economic development.
The Economics Department forecast that Russia’s GDP will decline by 1% and its imports by 9% this year. Next year, the growth is expected to be zero.
The Bank of Finland’s Russia forecast to be published later, as matters stand, will be slightly brighter.
The working group also published a risk scenario in which the Russian economy declines sharply from the second half of 2014 to 2016 and imports fall by a third relative to their 2013 level.
Even, according to the risk scenario prepared by the Economics Department, the slowdown of the Russian economy would have no decisive impact on the overall picture of the Finnish economy. In the risk scenario, Finland’s GDP would decline cumulatively by around 1% relative to the baseline scenario by 2016.
“I would emphasise that this risk analysis is a truly far-reaching in terms of its assumptions,” says Director General Markus Sovala who chaired the working group.
“The probable development of Russia has been taken into account in the forecast to be published by the Economics Department in September,” the DG said.
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