Pasi Kuoppamäki, the chief economist at Danske Bank, was photographed at the launch event of a forecast in Helsinki on 4 April 2023. Danske Bank in September said it has not adjusted its forecast for the Finnish economy in the wake of better-than-expected preliminary data, expecting the economy to contract by 0.2 per cent year-on-year in 2023. (Antti Hämäläinen – Lehtikuva)


FINLAND continues to have the bleakest economic prospects in the Nordics, according to the latest forecast by Danske Bank.

The Nordic financial group revealed yesterday it has upheld its forecast for a 0.2-per-cent decrease in the gross domestic product in spite of the stronger-than-expected growth reflected in preliminary data released by Statistics Finland.

“Inflation is continuing to strain the purchasing power of consumers, and the rise in interest rates is inhibiting investments by both households and companies. The labour markets remaining stable has provided sustainability for the economy,” explained Pasi Kuoppamäki, the chief economist at Danske Bank.

Both Denmark and Norway are forecast to continue growing – albeit at a lower rate than in recent years, whereas Sweden is to stagnate.

In Finland, the economic headwinds did nevertheless ease last spring: the combination of inflation slowing down as a consequence of falling energy prices and accelerating wage growth propped up the purchasing power of households.

Danske Bank forecasts that consumer prices will increase by 6.5 per cent this year and by 2.3 per cent next year.

“The near-future economic outlook is weak, the consumer is cautious and housing production is declining dramatically, but the petering out of inflation and interest rates will boost the purchasing power of consumers next year. We expect the release of pent-up demand to increase demand for both durable goods and real estate in 2024,” said Kuoppamäki.

Low unemployment has been a boon for the national economy in 2023. The forecast shows that the unemployment rate will creep up by 0.4 percentage points year-on-year to 7.2 per cent in 2023 before decreasing by 0.2 points to 7.0 per cent in 2024.

Finnish households have been able to hold on to their standard of living in the heavily inflationary environment due to the relatively solid employment situation and the savings they built up during the coronavirus pandemic.

Kuoppamäki reminded, though, that a growing number of households have had to dip into their savings and look for ways to balance their finances.

“The [household] saving rate fell to its lowest level since 1998 in 2022, and the deposit stock of households contracted in early 2023. The savings have yet to be exhausted, but in a time of high interest rates interest costs will continue to account for a growing share of costs for indebted households at the end of the year,” he stated.

Some 30 per cent of Finnish households have outstanding housing loans.

Aleksi Teivainen – HT