The quick assessment raises concerns about a recession in Finland
THE ECONOMY OF FINLAND seems to have contracted in the third quarter of the year.
Statistics Finland published a quick estimate on Tuesday, according to which the seasonally adjusted gross domestic product decreased by 0.1 percent from April to June on a quarterly basis.
Adjusted production in April-June grew by 1.7 percent from the previous quarter.
The estimate raised concerns among many economists that the contraction of the national economy will continue in the fourth quarter and thereby slide into recession. The technical definition of a recession is negative GDP growth for two consecutive quarters.
“That’s how it starts, a recession,” commented Pasi Kuoppamäki, Chief Economist of Danske Bank. “Finland’s GDP decreased slightly from the previous quarter in the third quarter of the year. The number may be better than you feared, but you can expect a further decrease as winter approaches.
Päivi PuontiThe head of forecasting at the Confederation of Finnish Business (EK) saw that the economy is likely to slip into a “technical recession”.
“It seems that the economic recession has started and there are no bright signs in sight for the rest of the year. The eurozone economy still grew in July-September, but its likely contraction at the end of the year will cause more problems for Finland, as the demand for goods exports continues to fall, he says. comment For Helsingin Sanomat.
Meri ObstbaumHead of forecasting at the Bank of Finland, viewed in magazine interview that the worst of the national economy is yet to come, even though the estimate for the third quarter was slightly better than expected. The probability of a recession is high due to the historically weakened consumer sentiment, the weakening of purchasing power caused by inflation and the rise in interest rates.
“All these signs point to a contraction in private consumption, although according to the bank card payment data, consumption has not yet significantly decreased, but only faded,” he said.
According to Obstbaum, the absence of a stronger decline in private consumption may be due to savings households accumulated during the coronavirus pandemic.
“Rapid inflation and rising interest rates will cause household savings to run out quickly at some point. That’s why households have to cut consumption at some point, he explained to Helsingin Sanomat.
The economic outlook is also weakened by the effects of the energy crisis on the growth of the euro area. Eurostat published preliminary data on Tuesday, according to which the eurozone economy grew by only 0.2 percent in July-September from the previous quarter. The economy grew by 0.8 percent in April-June compared to the previous quarter.
“Many research institutes are predicting a recession for Germany and Sweden, which are Finland’s most important trade partners. The energy crisis has already increased inflation in the euro area, but forecasts show that the worst effects of the crisis on economic growth are yet to come, Obstbaum said.
The share of the euro area in the value of Finland’s goods exports is about 40 percent.
Reijo HeiskanenOP Financial Group’s chief economist and Pasi SorjonenThe chief economist of Akava’s Confederation of Professional and Management Personnel warned against drawing serious conclusions from the quick assessment.
“The average growth in the early years is around 2.9 percent, so we are still better than the forecasts. There is no reason to talk about the recession yet. When it’s here, we’ll know, Heiskanen said.
“Recession already started?” tweeted Sorjonen. “A muted figure goes well with gloomy confidence indicators. It’s still worth waiting for actual advance information.”
Aleksi Teivainen – HT