Finland: Economic growth slows slightly in Q3
A second GDP release revealed the economy grew a revised 0.7% in the third quarter in seasonally- and calendar-adjusted terms from the previous quarter (previously reported: +0.5% quarter-on-quarter), which is down slightly from Q2’s 0.8% reading. In year-on-year calendar-adjusted terms, the economy expanded 2.2% in Q3 (previously reported: +1.9%), up from Q2’s 1.4% reading.
The small slowdown in quarter-on-quarter growth in Q3 was due to a 0.5% decrease in government consumption, which contrasted the 0.1% increase in Q2. On the other hand, private consumption growth accelerated to 1.5% in Q3 from 0.8% in Q2, likely on the back of a sustained increase in real wages and a continuation of easy credit conditions. Moreover, fixed investment growth accelerated to 1.1% in Q3 from 0.8% in Q2, primarily due to a notable acceleration in private investment and despite a drop in public investment.
Turning to the external sector, exports of goods and services increased 0.5% in Q3, contrasting the 1.1% drop in Q2, while imports rose 1.2%, which marks a small slowdown from Q2’s 1.4% increase. Overall, the external sector detracted 0.3 percentage points from economic growth in Q3, less than the 1.1 percentage-point detraction in Q2.
In 2020, the economy is expected to grow at a slower pace than this year, largely on weaker export growth as foreign demand appetite wanes and trade protectionism rises. With that being said, private consumption should grow at a solid pace thanks to low unemployment and rising wages. Public spending should also increase healthily as the ruling coalition government plans to raise expenditure by approximately EUR 2 billion; moreover, the effects of this increase on the real economy should be amplified by the fact that spending on interest payments is forecast to drop significantly.