The Finnish economy shrank by 0.6% in the last quarter of 2022 compared to the previous quarter, with all major demand categories, including exports, investments, and consumption, decreasing. According to the chief economist of the Central Chamber of Commerce, Jukka Appelqvist, Finland has effectively lost one year of economic growth due to the latest economic crisis. There are few signs of improvement in the situation, but it cannot be described as a complete collapse. The private consumption chief economist predicts that it will continue to be weak for months.
The latest figures released by Statistics Finland revealed that the country's gross domestic product (GDP) contracted by 0.6% in the last quarter of 2022 compared to the previous quarter, which is significantly worse than earlier estimates. Just two weeks ago, Statistics Finland had predicted a 0.2% contraction in GDP.
Despite this, the GDP for the entire year increased by 2% compared to the previous year. However, according to Appelqvist, this figure only reflects the so-called growth inheritance and the recovery at the beginning of the year.
The second half of the year saw a decline in the economy, which has now continued for two consecutive quarters, a common criterion for a recession. The economic crisis triggered by Russia's attack has been characterized by a gradual worsening of the situation driven by high inflation and tightening monetary policy. In the last quarter of the year, the downturn intensified, with all sub-categories of GDP contracting, making it difficult to find any bright spots.
However, Appelqvist does not believe that this situation constitutes a complete collapse. He remains optimistic, saying that things could have been much worse. Still, he acknowledges that all major demand categories, including exports, investments, and consumption, decreased, with private consumption continuing to decline as inflation weakened the purchasing power of wage earners.
Appelqvist attributes the decline in private consumption to higher interest costs and expensive electricity bills, which left little room for other expenses. However, he also notes that households have managed to cope well with the situation, and the decline in consumption has been relatively moderate. Nevertheless, he expects private consumption to remain weak for several months until wages rise later in the year, supporting the recovery of purchasing power.
Finland's economy shrinks for two consecutive quarters: Expert analysis
- Font Size
- Reading Mode