A protracted yet shallow recession in Finland lies ahead

We expect a shallow but protracted recession in Finland from Q3 this year to Q1 2023, with a contraction of just over 1% from peak to trough. While Q2 growth proved resilient, pushing up our forecast for 2022 to 2.2%, the near-term outlook is bleak. High inflation is seeping into core prices, squeezing real incomes and denting confidence, while the ECB hikes rates. We see growth of 2.3% in 2022 and 0% in 2023, although there’s great uncertainty around the outlook.

What you will learn:

• GDP in H1 surprised to the upside. After an Omicron-related drop in January, activity increased in the following months despite the outbreak of the Russia-Ukraine war.
• The economy grew 0.5% q/q in Q1 and 0.9% in Q2, demonstrating notable resilience, despite Finland’s trade exposure to Russia and rising headwinds.
• But a slowdown is imminent, with record-low consumer confidence and weakening business confidence across sectors.