, and new areas of concern have emerged both internationally and domestically. [ slide 7 ] the recovery in industrial output has progressed at a very different pace in different industries. the chemical industry appears to have already recovered from the recession. metal industry output, too, began to grow during the course of 2010, with particularly rapid growth in fabricated metals in response to export demand. there was only slow growth in electrical engineering and electronics, with output still almost 20 % below the level of 2008. there was brisk growth in forest industry output, but cuts in production capacity mean there is no imminent prospect of a rapid return to the pre - recession level of output. industrial output as a whole grew rapidly, particularly in the second and fourth quarters of 2010. the prominence of capital goods in finland ’ s export structure meant that exports did not immediately respond to recovery in the export markets. the main drivers of finnish exports in 2010 were forest and chemical industry products and fabricated metals. consumer confidence levels recorded in finland in 2010 reached a record high, even though the euro area debt crisis did at times cause uncertainty among finnish consumers. the stronger confidence and continuation of low interest rates continued to encourage the taking out of new housing loans. the pace of price rises eased in the second half of the year. the labour market situation has been improving, but rather slowly. growth in the number of employed was slower than expected at the end of 2010, and the unemployment rate has remained around 8 % since last september. the key challenge for economic policy in finland is to restore the sustainability of the public finances, weakened by the recession. the recession caused a deep reduction in both central and local government tax receipts and increased the level of government debt. in addition to the cost of servicing the debt, the general government balance will also be compromised in the future by increasing age - related expenditure. conclusion recent months have seen signs of a renewed pick - up in world growth. despite the heightened uncertainty and increased downside risks, stock prices and various confidence indicators are still at high levels. it thus looks that these shocks are not enough to derail the recovery of the world economy. however, uncertainty is exceptionally high, as highlighted by the recent developments in portugal. despite the brisk gdp growth numbers many advanced countries are still well below their pre - recession production levels. looking forward, they are struggling with population ageing, structural problems, and the accumulation of public debt. all this is clearly visible in the public finances. therefore for most advanced countries the key challenge is

pentti hakkarainen : economic outlook – still uncharted waters ahead speech by mr pentti hakkarainen, deputy governor of the bank of finland, at the norwayfinland trade association, helsinki, 11 april 2011. * * * the world economy has been recovering from the deep financial and economic crisis. recently the rapid increase in energy prices, the natural disaster in japan, and the once again heightened sovereign debt crisis have all casted a shadow over the global economic prospects. should we be optimistic or pessimistic on the current outlook? as winston churchill has stated, “ a pessimist sees the difficulty in every opportunity ; an optimist sees the opportunity in every difficulty. ” today, i ’ ve chosen to be on the positive side, trying to be still a realist. i ’ d like to briefly discuss the trends in the world economic outlook and the current situation in europe. there are quite a number of positive signs. thereafter i ’ d like to say a few words on the long - term fiscal policy challenges that the recent crisis has posed to most advanced countries. finally, i ’ ll present the bank of finland ’ s forecast of the finnish economy. the global outlook the world economy has been recovering from the economic crisis during the latter part of 2010 and early months of 2011. according to the bank of finland ’ s march 2011 forecast, the world economy and world trade will continue to grow at a brisk pace. however, growth has remained highly divergent in different regions, with the emerging economies under china ’ s lead still firmly at the forefront. [ slide 2 ] advanced economies, in turn, have witnessed continued slow recovery by historical standards, and unemployment has remained high. recently, differences in growth have also started to appear across the advanced economies. while the economic outlook for the united states and partly for europe has improved, prospects have remained very weak for some european countries. the forecast was finalised before the latest increase of uncertainty : the rapid rise of oil price, the tsunami and the nuclear disaster in japan, and the recent heightening of the sovereign debt crisis. it is still too early to say the full impact of these but the sign is clear : it is negative. markets are relatively optimistic : stock indices outside japan have rebounded [ slide 3 ]. on the other hand, the march pmi ( survey ) indices show some signs of taming. on balance, it currently looks that these shocks are not enough to derail the recovery