Finland's economic growth is slowing down in 2022 – private consumption is not enough to save growth

According to Aktia’s Chief Economist Lasse Corin, Finland's economy will grow by 3.3% this year, but the growth will slow down to 2.3% in 2022. The dismantling of the pent-up demand for consumption and the rapid recovery of the labour market are not enough to save the growth.

In a report published today by Aktia, Chief Economist Lasse Corin states that positive labour market developments have restored consumer confidence to pre-pandemic levels. However, the dismantling of coronavirus restrictions is not expected to significantly increase household consumption.

"Household savings have increased strongly during the pandemic, allowing room for growth in consumption. The restrictions made it impossible to buy many services. On the other hand, households have had the opportunity to dismantle the pent-up demand for goods, which means that the dismantling of coronavirus restrictions does not bring significant positive support to the demand for goods,” says Lasse Corin.

Although demand for services is expected to pick up, services lost during the pandemic will not be fully replaced by increased consumption – for example, lost restaurant dinners and trips abroad are not fully replaced by new ones and thus a large part of them is lost demand. On the other hand, the sales of household appliances, furniture and various renovation equipment, for example, have been strong even during the pandemic. In these categories, demand will decrease as dismantling restrictions and returning to normal decrease the need for home renewals and improvements.

The rapid recovery of the labour market exceeded Aktia's forecasts

The recovery of Finland's employment situation has been a positive surprise. Compared to Aktia's previous forecast, unemployment figures will improve to 7.6% this year and to 7.2% in 2022. The decrease in unemployment has been widespread, but the uncertainties caused by the coronavirus delta variant and the delay in opening up the economies have put a strain particularly on the employment of the service and tourism sectors.

"The rapid recovery of the labour market has been conducive in supporting economic growth. The combined salary of all employees has already exceeded the pre-pandemic level at a monthly level," says Lasse Corin. "In addition to the development of the labour market, Finland's economic growth is boosted especially by the positive sentiment in exports – the industrial order book in particular has increased to such an extent that it has not been perceived this strong since the period preceding the financial crisis in 2008.”

More than half of Finland's exports are directed to the European Union, while 15% are directed to the United States and 15% to Asia. The positive economic outlook for these regions benefits Finnish export companies. Exports are expected to clearly grow increasingly towards the end of 2021 and the volume of exports throughout the year are expected to increase by 3.9% compared to one year ago. Exports of services will pick up more quickly than exports of goods, thus returning to the trend before corona.

The slowdown in the economic growth in the main export countries of Finland will inevitably also be reflected here in Finland. As economic uncertainty increases, the risks of growth in consumption are also elevated.

Further information
Lasse Corin, Chief Economist, tel. +358 40 8080 635, lasse.corin@aktia.fi
Katja Korsinkin, Communications Manager, tel. +358 50 411 3036, katja.korsinkin@aktia.fi

Aktia is a Finnish asset manager, bank and life insurer that has been creating wealth and wellbeing from one generation to the next for 200 years. We serve our customers in digital channels everywhere and face-to-face in our offices in the Helsinki, Turku, Tampere, Vaasa and Oulu regions. Our award-winning asset management business sells investment funds internationally. We employ approximately 900 people around Finland. Aktia's assets under management (AuM) on 30 June 2021 amounted to EUR 15.6 billion, and the balance sheet total was EUR 11.2 billion. Aktia's shares are listed on Nasdaq Helsinki Ltd (AKTIA). aktia.com.

Attachment

• Aktia-The Chief Economist's forecast 2021