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Finnish Economy Drawn Into Recession

ByDanske Markets
Published 12/15/2011, 08:32 AM
Updated 05/14/2017, 06:45 AM

We have revised our outlook for Finland and cut our GDP forecast to -1.0% for 2012. This is mainly due to the continued euro crisis that doesn’t leave export-driven Finland untouched. Risks are currently to the downside even to this estimate for next year. The domestic market has held up well. Private consumption rose 3.7% between January and September 2011. In particular, durable goods were a positive surprise with an increase of 9% over the same period. Figures show that consumers are still spending despite the grim economic outlook in Europe. We expect private consumption to increase by 1.2% in 2012 due to relatively stable unemployment, consumer confidence and granted salary increases. We expect investments to rise by 5% in 2011 but decline slightly next year.

Low interest rates continue to help the domestic sectors, especially the housing market, where the majority of mortgage rates are linked to short euribor rates. Exports rose marginally in January-September 2011 compared with the previous year. However, preliminary figures show a severe drop in the export of goods in October. We anticipate a continued fall in exports in the end of the year, as demand in important export countries in Europe continues to weaken. Finnish manufacturing has a high weight in cyclical industries like paper and investment goods. We expect exports to fall by around 3% in both 2011 and 2012. We expect employment to hold up fairly well, assuming that most companies will rely on temporary layoffs, reduced hours and other soft methods, as was the case in 2009.


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