The Finnish economy did not nosedive as dramatically as feared in the first half of the coronavirus-disrupted year, judging by preliminary data. (Olivia Ranta – Lehtikuva)


THE CHIEF EXECUTIVE of Etla Economic Research, Aki Kangasharju, has alleviated concerns that the global increase in new coronavirus infections could deliver another setback to the economy and intensify the recession.

Kangasharju on Wednesday reminded that a second, and even a third, wave of infections was expected, saying he is confident that the pandemic can be kept under control without shutting down economies.

“I don’t think this in any way crumbles the expectation that the recovery can continue,” he commented.

Finland, he highlighted, appears to have avoided the worst-case scenario because the slowdown witnessed earlier this year was not as dramatic as feared, as evidenced by preliminary statistics and the interim reports unveiled by companies in recent weeks.

The national economy was at worst expected to contract by as much 25 per cent, but more recent estimates suggest the contraction is likely to be around 10 per cent.

The Bank of Finland is presently forecasting that the economy could contract by 13 per cent. Etla, in turn, places the year-on-year contraction to around five per cent. Kangasharju believes the forecast is plausible based on preliminary data on the gross domestic product and the results of companies from the first half of the year.

“The collapse was nowhere near as bad as feared in the second quarter,” he pointed out.

He added that the outlook is improving also for consumer confidence and the purchasing managers’ index in Germany. The employment situation, on the other hand, may continue to deteriorate as it will likely prove impossible to avoid lay-offs and bankruptcies.

“This isn’t over yet in that sense,” he said.

Kangasharju also expressed his reservations about the 750-billion-euro recovery plan thrashed out by the European Union in mid-July, viewing that its benefits are more political than economic. The 27-country bloc, he explained, demonstrated that it is capable of working together when push comes to shove by reaching a compromise on the plan.

“Most of the money will probably be spent on nonsense,” he retorted, lamenting that it could also be spent on securing public approval for difficult but necessary structural reforms in countries like Italy.

“This was about increasing and building trust capital,” he said. “In the long term, that’s not a logic that can be used to improve things, but maybe it’ll lower the likelihood of a eurozone crisis in the next few years.”

Aleksi Teivainen – HT
Source: Uusi Suomi