The Finnish Commerce Federation forecasts that commerce will achieve slight growth this year. Purchasing power is supported by the slow inflation rate and stop in the growth of unemployment. However, there is the threat of the stunted growth of commerce being suppressed by domestic measures. Instead of tax increases, the structures of the economic line, society and labour market should at last be boldly reformed.

Last year was somewhat divided for commerce. The biggest retail business sectors, grocery trade, department stores and hardware store sector, shrank, while several specialty goods trade sectors grew strongly. Undergoing structural changes and suffering from international competition, wholesale trade lost turnover in almost all sectors. The turnover of wholesale trade serving industry and consumption plunged the most.

There were also issues with employment in commerce. Less new jobs opened in commerce, and filling them took more time than before. In December 2008, 23% of the retail trade vacancies open during the month were filled, whereas only 10% of open vacancies were filled last December. At the same time, the number of unemployed salespersons seeking a job has increased by 87%.

According to the forecast of the Finnish Commerce Federation, competition in the grocery trade over market shares will continue this year, which will keep the pressure on food prices low, yet also restrict the growth in turnover. International competition for customers is capturing specialty goods trade in clothing, while the recovery of construction activity supports hardware store sales.

The slow inflation and stop in the growth of unemployment will support purchasing power this year, so the volume of turnover of retail business, i.e. turnover adjusted for price fluctuations, is estimated to increase by approximately 0.5%.

“This is not a major turn; even in the best case scenario, it means slowly plodding forward. Our national economy simply does not have the preconditions for growth figures such as those seen at the beginning of the 2000s,” says Jaana Kurjenoja, Chief Economist at the Federation of Finnish Commerce.

Driven by construction and industrial investments, the wholesale trade will achieve a growth of a few percent; this, too, is clearly slower than at the beginning of the 2000s.

“It is possible to see a lot of risks in the economy, ranging from economic growth in China to the refugee crisis in Europe – let alone Finland’s economic policy. Anything can happen. Of course, there are also positive currents in the air, such as raw material prices and the weak euro,” Kurjenoja sums up the uncertainties related to the forecast.

Tax increases would wreck the emerging growth

Talks of tax increases sound particularly worrying from the point of view of the future of commerce, a field that is a significant employer and investor. In fact, the painstaking growth forecast for commerce can still be wrecked completely through domestic measures.

Talks that have strengthened during the autumn and winter have proposed that the competitiveness of Finland could be improved by way of a fiscal devaluation in which lower employer contributions would be compensated for by increasing the value added tax rate. For commerce, however, all tax increases would be toxic. In this case, the service sector and consumers would have to pay for the improving price competitiveness of the export industry as a result of weakening purchasing power.

As a result of increasing the lowest value added tax rates, food, pharmaceuticals and public transport would become more expensive, which would punish the most needy in particular. If the aim is not to deliberately make their position even poorer, the tax increases should be reimbursed to them by way of income redistribution. Thus, it would not result in income being accumulated in the budget as intended.

“Fiscal devaluation gives an excuse for not making reforms. Reforms must be made in the labour market and public sector in particular to lighten the structures and provide flexibility. The labour market system should at least show that it is capable of making changes happen,” says Juhani Pekkala, Managing Director of the Finnish Commerce Federation.

Further information:

Jaana Kurjenoja, Chief Economist, Finnish Commerce Federation, tel. +358 (0)9 1728 5134, jaana.kurjenoja(at)kauppa.fi

Juhani Pekkala, Managing Director, Finnish Commerce Federation, +358 (0)9 1728 5111, +358 400 419 560, juhani.pekkala(at)kauppa.fi

The Finnish Commerce Federation represents commerce – the largest sector of economic life. Commerce employs around 300,000 persons in Finland. The Federation has around 7,000 member companies and represents both retail and wholesale commerce in industry policy and labour market lobbying. www.kauppa.fi