Assignment

Gedu College of Business Studies

Gedu, Chhukha

Assignment Submitted by:

Lekzin Dorji Wangmo ( 03230155)

SAFE, 1st Semester, Bachelor of Finance & Economics, A

12/03/2024
 DECLARATION

Module Code: ECN102 Type of Course Work: Individual Task

Module Title: Macroeconomics Module Tutor: Mr. Samten Jamtsho
Date of Submission: 12 March 2024

I hereby declare that this academic work is my own and those referred ideas from other
sources have been appropriately acknowledged. The material in this submission has not
been previously submitted for assessment. I understand that if found otherwise, my
academic work will be canceled and no marks will be awarded besides legal
consequences.
Lekzin Dorji Wangmo ( 03230155)

FOR MODULE TUTOR

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Report on the Economic Data of Finland and Comparison with Another Country

Introduction
Finnish economy has faced a challenging situation in the recent times, with Statistics
Finland predicting a slip into recession. Contradicting this, the International Monetary
Fund (IMF) has forecast a positive growth for the country in 2024. The main purpose
of the following report is to analyze and interpret the reasons for such a discrepancy
in reports along with recommendations for investments, as well as to provide a
comparison of Zimbabwe's economy to the Finnish economy.

Economic Outlook:

Finland:

Statistics Finland's decision to declare a recession is mainly due to several key

factors. To begin with, the Finnish economy has experienced a significant decline in
industrial production and exports in recent times. There are a variety of factors that
can be attributed to the recessionary signals, and this is including the global
economic downturn, supply chain disruptions, and a rise in inflation. Secondly, the
COVID-19 pandemic has had a further detrimental effect on the its economy, which
has led to an increase in unemployment and a reduction in consumer spending. On
top of all these factors, the ongoing war in Ukraine has further exacerbated economic
challenges, resulting in increased inflation and lower foreign investment.

Zimbabwe:

Zimbabwe's economic landscape has been characterized by substantial challenges

that include hyperinflation, currency instability, and structural inefficiencies. As a
result of the deep-rooted economic issues in Zimbabwe, sustained growth has been
hampered by a number of challenges. However, recent attempts toward economic
reforms and stabilization may offer some prospects for some relatively modest
growth in the near term.
International Monetary Fund (IMF) Prediction for 2024 (Finland):

The IMF's growth forecast for Finland this year is based on factors such as ongoing
reforms, investments in infrastructure, and the recovery of sectors and industries
such as technology and tourism. Several stimulus packages have also been
implemented by the Finnish government in order to aid many businesses and
households. These measures include wage subsidies, loan guarantees, and
investment in infrastructure. It should also be noted that Finland's strong vaccination
rate and its excellent public health measures have contributed to the gradual
reopening of the economy in the past few years. Moreover, the country's participation
in the European Union's recovery fund has brought about additional financial support.
The IMF's optimistic outlook suggests that although the Finnish economy may be
facing short-term challenges, it is on a path of recovery and mend.

Impact of European Central Bank (ECB) Policy:

The policy action made by the European Central Bank (ECB) would have a
significant impact on Finland's economic growth. The ECB is in charge of setting
interest rates and managing monetary policy in the European Union.

If the ECB decides to raise interest rates or tighten monetary policy, this could the
potential to impact the economic growth of Finland. In the event that interest rates
rise, borrowing is likely to become more costly, and the end of quantitative easing
measures may negatively affect the availability of credit, thus slowing the economic
growth even further.

In contrast, if the ECB implements an expansionary monetary policy, such as lower

interest rates or increased bond purchases, it could provide a boost to the Finnish
economy. This would lead to lower interest rates, making it more affordable for
businesses to borrow and also invest in several expansionary activities. Additionally,
increased liquidity in the markets would also boost consumer spending and
investment, potentially promoting economic growth.
 Comparative Economic Analysis:

Finland & Zimbabwe (2018-2022) (In USD Billions)

Year GDP (in billions) GDP (in billions)

2022 282.65 27.37
2021 296.47 28.37
2020 71.89 21.51
2019 268.51 21.83
2018 275.71 34.16
Finland Total population (2022) 5,556,106
Inflation,
GDP Growth Unemploymen
Consumer
Year GDP (in billions) GDP per Capita (Annual t (% of total
Prices
Percentage) labor forces)
(Annual %)
2022 282.65 50871.9 1.6 6.7 7.1
2021 296.47 5354.7 2.8 7.6 2.2
2020 71.89 49169.7 -2.4 7.8 0.3
2019 268.51 48629.9 2.1 6.7 1
2018 275.71 49987.6 1.1 7.4 1.1

GDP Over Five Years for Two Countries

350
296.47
300 282.65 275.71
268.51
250
GDP (in billion USD)

200
Finland
150 Zimbabwe

100 71.89
50 27.37 28.37 34.16
21.51 21.83
0
2022 2021 2020 2019 2018
Year
Thi
s graph shows the comparison between Finland and Zimbabwe over the last 5years.
 Zimbabwe Total population (2022) 16320537
GDP
Growth Unemployment
Inflation, Consumer
GDP (in billions) GDP Per Capita (Annual (% of Total
Prices (Annual %)
Percentage Labor Force)
)
2022 27.37 1676.8 6.5 9.3 104.7
2021 28.37 1773.9 8.5 9.5 98.5
2020 21.51 1372.7 -7.8 8.7 557.2
2019 21.83 1421.9 -6.3 7.4 255.3
2018 34.16 2269.2 5 6.8 10.6

These two tables show the GDP, GDP Per Capita, Unemployment rate, and Inflation
rate of Finland and Zimbabwe over the course of the last 5 years. Even though
Zimbabwe has a higher population, Finland exceeds in terms of GDP. The
unemployment rate is also substantially lower for Finland as compared to Zimbabwe,
whose inflation rate is way too high in comparison. From this, it can easily be
concluded the economic situation of the two countries and determine which is a
better option for investment.

Analysis:

1. Finland has a considerably larger and much more stable economy compared to
Zimbabwe.
2. Zimbabwe's higher GDP growth can be attributed to a low base effect (starting
from a smaller economy).
3. However, Zimbabwe's high inflation rate significantly erodes any gains from their
growth.
4. Finland's unemployment rate is lower, indicating at a stronger and more robust job
market.
Investment Recommendation

Based on the analysis, investing Euro 150,000 in Finland might be less risky
compared to Zimbabwe due to the following reasons:

Firstly, Finland has a more stable and developed economy. Secondly. There is lower
inflation in Finland, which preserves the value of the investment. And thirdly, there is
a large potential for growth in Finland despite recessionary signals.

However, further considerations are needed:

Monitoring Global Economic Trends: Given Finland's reliance on global trade, it is

essential to monitor international economic trends, particularly in key export markets.

Evaluating Policy Developments: It is critical to stay abreast of policy actions by the

European Central Bank and their potential impact on Finland's economic landscape.

Diversifying Investment Portfolio: While Finland presents investment opportunities

filled with potential, diversification across different asset classes and regions could
mitigate risks associated with economic fluctuations.

Recommendation and Key Insights:

Based on the analysis of economic data and the current economic forecast:

Investment Recommendation: Considering the relatively stable economic conditions

and the potential for modest development in Finland, investing Euro 150,000 in the
Finnish market could be a wise move. After all, Finland's diversified economy,
combined with its resilience in key industries, offers very favorable prospects for
investment returns.

Cost of Living Surge: The rise in the cost of living further strains economic conditions.
In contrast, the International Monetary Fund (IMF) predicts growth of 0.5% in 2024.
This optimism was based on the expectation that the headwinds affecting the
economy would subside, leading to a comeback in growth.

Conclusion

Based on the analysis of the economic data of the two countries, Finland and
Zimbabwe, it is recommended that the manager invest in Finland. The country's
strong fundamentals, growing economic prospects, and comparable economic
performance all put together lead to an attractive investment opportunity. Moving
forward, the manager should focus on conducting further due diligence in order to
identify specific sectors and industries that have the potential to yield better returns.