Investments have picked up also outside the construction industry, says Timo Vesala, an economist at Lähi-Tapiola.


The Finnish economy may grow this year at a rate far exceeding its long-term growth potential, says Timo Vesala, an economist at Lähi-Tapiola.

Vesala estimates that the country’s economy can expand by up to three per cent this year, despite the fact what he describes as demographic headwinds continue to constrain the long-term growth potential to no more than roughly one per cent per annum.

Such a growth rate is attainable as long as key pieces of the puzzle fall into place simultaneously, says Vesala.

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“That may happen this year, although this should not be regarded as a baseline projection,” he writes in his blog.

Statistics Finland, he points out, has published preliminary data indicating that the gross domestic product grew by 1.6 per cent from the previous quarter – the highest quarter-on-quarter growth in over six years – between January and March.

It is likely, however, that the quarterly data will be specified later, reminds Vesala.

Several financial institutions have recently upgraded their growth forecasts for Finland. Vesala views that despite the upgrades the institutions continue to keep a lid on excitement over the growth data because macroeconomic indicators are susceptible to random fluctuations.

“Economists first want to see comprehensive enough evidence of a reversal before changing their forecasts dramatically,” he explains.

He points out that investment activity is showing signs of recovery also outside the construction industry. The world economy, meanwhile, is experiencing its strongest growth since 2010. “Finnish exports may turn from a brake to an accelerator of growth,” he says.

The Finnish economy, he also reminds, follows global economic trends somewhat belatedly.

“We should enjoy the burst of growth while economists are already brewing the next reasons for doom and gloom. Finland follows global economic trends slightly belatedly, and many countries that are crucial for overall global demand may see a peak in economic growth in the first half of the ongoing year,” he warns.

Aleksi Teivainen – HT
Photo: Martti Kainulainen – Lehtikuva
Source: Uusi Suomi