Finland: Economic growth surges to an over seven-year high at the start of 2018
May 30, 2018
In Q1 2018, the economy expanded for the tenth consecutive quarter, with growth accelerating to an over seven-year high. According to preliminary data released by Statistics Finland on 31 May, the economy grew 1.2% in seasonally-adjusted quarter-on-quarter terms in Q1 2018, up from Q4 2017’s revised growth of 0.9% (previously reported: +0.7% quarter-on-quarter). In unadjusted year-on-year terms, economic growth accelerated to 2.8% in Q1, up from Q4’s revised expansion of 2.4% (previously reported: +2.6% year-on-year).
In quarter-on-quarter seasonally-adjusted terms, economic growth at the start of 2018 accelerated on the back of exceptionally strong fixed investment, which grew 3.7%—up from Q4’s expansion of 0.6% and a near eleven-year high. This was due to a large increase in private sector investment, which came amid high business confidence in Finland. Meanwhile, government consumption swung to a 1.4% expansion in Q1, contrasting Q4’s 1.2% decrease. However, despite lower unemployment and record-high consumer confidence, private consumption growth decelerated to 0.3% in Q1 from 0.7% in Q4.
In seasonally-adjusted terms, exports of goods and services fell 1.1% in Q1 compared to the prior quarter, contrasting Q4 2017’s 2.3% expansion. Imports also tumbled in Q1, decreasing 0.5% (Q4: +1.4% qoq). As a result, the external sector detracted 0.2 percentage points from GDP growth in Q1, contrasting the 0.4 percentage-point contribution made in Q4.
Looking ahead, the economy should broadly maintain its growth momentum this year. Despite its poor performance in Q1, the external sector should prove supportive thanks to a healthy global economy and the increasing competitiveness of Finnish exports on the back of the Competitiveness Pact of 2016. Moreover, historically-loose monetary policy will continue to support lending in Finland this year. Private consumption, specifically, should benefit from an expected decrease in unemployment.
Author: Edward Gardner, Economist