Finland Economic Outlook
According to a second release, the economy lost further momentum in Q4: Quarter-on-quarter GDP fell 0.4% (Q3: -0.2% qoq s.a.). A larger drop in fixed investment and exports in light of slowing external demand and eroded business confidence caused the downturn. Slower growth in public spending and another drop in private consumption further weighed on the reading. In Q1, the economy likely remains in recession, with tighter financing conditions and subdued foreign demand depressing growth. In January, all subcomponents of the monthly economic activity index weakened from the prior quarter. That said, in the same month, seasonally adjusted monthly sales rebounded from Q4’s slump, with consumer sentiment and the unemployment rate improving through February. Meanwhile, on 17 March, Turkey endorsed Finland’s NATO application, boding well for national security.
In February, harmonized inflation was stable at January’s 7.9%, with higher price pressures for food offsetting softer growth in transport prices. Our panel sees the headline rate cooling from current levels on softer demand, lower commodity prices and a high base effect. Tighter EU monetary policy will further support disinflation. Energy prices are a key factor to watch.