Finnish economy likely to expand 2.8 pct this year, to slow to 1.5 pct in 2018 – Danske Bank

Finland’s economic growth accelerated stronger than expectations in the first quarter of this year. The GDP rose 2.7 percent year-on-year after growing 1.4 percent in FY2016. Leading indicators continue to be elevated. According to a Danske Bank research report, the Finnish economy is expected to expand 2.8 percent this year and decelerate to 1.5 percent next year.

Consumption continues brisk growth, whereas manufacturing exports and investment also contribute positively to rising GDP. Finnish GDP continues to be well below its previous peak and the economy is cruising towards potential output. Future growth depends on structural reforms and labor participation, which is well below other Nordic nations noted Danske Bank.

The main risks are linked to the global outlook. Domestic risk is partially political. Private consumption continues to expand 2 percent this year. Rising inflation and low wage growth challenge purchasing power, but better employment, high confidence, an income tax cut and cheap debt have kept consumption on a growth track, added Danske Bank.

Meanwhile, exports of goods and services were up 8.8 percent in the first quarter, while business surveys suggest growing order books. The outlook is better, owing to growth in export markets, particularly Russia, improving price competitiveness, many large ship orders and new production facilities in forest and automotive industries. Rising demand, higher confidence and low interest rates have stimulated manufacturing investment as well.