Wednesday 10/28/20

Coronavirus crisis hit the Finnish economy harder than expected

Finland's gross domestic product (GDP) contracted 6.4% year-on-year in the second quarter.

Private consumption and exports, which are key elements for the good economic functioning of the country, suffered significant drops.


Vuosaari harbour, in Helsinki. Photo: Port of Helsinki.

The final figures have already been released and they are worse than expected. The Finnish economy suffered a year-on-year contraction of 6.4% in the second quarter of the year, in which the effects of the coronavirus and economic restrictions were the norm around the world.

The drop in GDP was 4.5% compared to the previous quarter, according to the data published on Friday by the Finnish statistical office.

The fall is less severe than that registered in the main European countries, but it is greater than that estimated by Finnish analysts, who had forecast a contraction of around 5%. To date, in the EU only Lithuania (-3.7%) has suffered less than Finland in terms of GDP, according to Eurostat's preliminary figures 


Source: Statistics Finland.

These results also confirm a worsening of the recession. The Finnish economy has already contracted for three quarters in a row. But the contraction in the second quarter of 2020 is the sharpest of those reported to date.

Exports and consumption, which are key elements for the good economic functioning of the country, suffered significant drops.

Foreign trade

The sales of Finnish products and services abroad suffered a severe blow. According to Statistics Finland,  in the second quarter the volume of exports contracted by 12% year-on-year and by 8.7% from the January to March period.

The sharp drop in exports may have a lot to do with the situation in the rest of Europe - and in the rest of the world, for some industries - in the same period. The second quarter was the one with the greatest expansion of the virus, with many countries imposing strict lockdowns and harsh restrictions to curb its spread.

But the outside world cannot be blamed for all the decline. The Finnish economy also reacted to the pessimistic situation by getting defensive, and this has been reflected in the evolution of imports and domestic consumption.

Consumption fell 10.9%

In this scenario, purchases of goods and services abroad did not evolve at the usual rate either. According to Statistics Finland, imports decreased by 12.7% year-on-year and by 9.8% from the previous quarter.

The volume of private consumption - a key element for maintaining employment - contracted by 10.9% from twelve months back and by 6.9% from the previous quarter.

The only major element of GDP that suffered a less severe decline was investment. Gross fixed capital formation (investments) fell 1.2% year-on-year and by 0.6% in quarter-on-quarter-terms, according to Statistics Finland's calculations.