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Finnish economy expands above expectations in Q1, growth likely to reach 3 pct in 2018

Finland’s economic growth is on the way to meet the 3 percent growth forecast for this year; however, quarter growth rates are likely to decelerate in the near future, noted Nordea Bank in a research report.

Finnish first quarter GDP figures came in surprisingly strong. At 1.2 percent quarterly growth, it was above forecast. The fourth quarter 2017 growth was upwardly revised to 0.9 percent from 0.6 percent growth. These figures signify that the economic growth will reach 3 percent in 2018.

In the national accounts, the biggest upside surprise came from fixed asset investment. In particular, growth in machinery and equipment investment came in solid. Construction growth was also solid but softness is still apparent in R&D investment. However, a concerning sign about the future growth prospects of the Finnish economy.

Consumption growth continued to advance from rebounding labor market conditions and solid sentiment. On the contrary, a downward correction was seen in foreign trade after a solid performance last year. However, from the perspective of net exports, the decline in exports was partially countered by a fall in in imports.

The Finnish economic growth has peaked and there is a possibility of a downward correction in the second quarter of 2018 figures after the exceptionally solid first quarter 2018. The correction might be driven by fixed asset investment following the very solid growth seen at the start of 2018. Overall, the already high pace of investment suggests that investment growth rates are expected to fall from the current high levels, stated Nordea Bank.

Finnish economy’s overall picture continues to be positive. A wide set of economic indicators imply continued growth. The fall in the monthly production indicator was at least partially because of seasonal adjustment and Easter effect and should not be taken as a sign of a profound weakness. Short-term growth prospects are underpinned by strong developments in the labor market. Although rebounds in the both unemployment and employment figures came to a temporary halt in April, overall trend have stayed positive and sentiment indicators point towards strong trends in the months ahead. Moreover, consumption growth is also underpinned by very strong sentiment figures.

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