Finland: Economic growth accelerates in Q4
February 28, 2018
According to preliminary data released on 28 February by Statistics Finland, the economy picked up growth momentum in the fourth quarter of 2017. Although the fourth-quarter results were encouraging, downward revisions were made to figures for the third quarter. The economy expanded at a seasonally-adjusted rate of 0.7% in Q4 from the previous quarter, down from Q3’s revised growth of 0.2% (previously reported: +0.4% quarter-on-quarter). In unadjusted year-on-year terms, growth accelerated to 2.6% in Q4, up from Q3’s revised expansion of 2.4% (previously reported: +2.8% year-on-year).
In quarter-on-quarter terms, seasonally-adjusted economic growth accelerated in Q4 on the back of strong private consumption dynamics, despite a decline in real wages. Private consumption growth, which accelerated from 0.5% in Q3 to 0.7% in Q4, likely benefited from high consumer confidence and a tighter labor market. On the other hand, government consumption decreased 0.7% in Q4, contrasting Q3’s revised growth of 1.6% (previously reported: +1.1% qoq). In addition, fixed investment fell 0.4% in Q4, a deterioration from Q3’s revised expansion of 2.1% (previously reported: +2.3% qoq).
The external sector had a more upbeat quarter. In seasonally-adjusted, quarter-on-quarter terms, exports grew 2.2% in Q4, higher than Q3’s revised 0.7% contraction (previously reported: -2.0% qoq). Imports, meanwhile, grew 0.6% in Q4, up from Q3’s revised 1.4% decrease (previously reported: -2.5% qoq). As a result, the external sector’s contribution to GDP growth increased from Q3’s revised 0.3 percentage-point contribution (previously reported: +0.2 percentage points) to 0.6 percentage points in Q4, the most since Q1 2017.
All in all, the economy grew 3.0% in 2017, a strong result when compared to 2016’s 1.9% expansion and the best figure in seven years. It also compared favorably to the Euro area, which grew 2.5% in 2017. Although the economy is expected to grow at a slower rate than 3.0% this year, it is seen continuing to benefit from an easy credit environment—despite probable tighter monetary policy from the European Central Bank—higher employment levels, and strong demand abroad for Finnish exports.
Author: Edward Gardner, Economist