Finland: GDP growth accelerates in Q2; economy returns to pre-pandemic levels
August 31, 2021
Economic growth accelerated in the second quarter, with GDP increasing 2.1% on a seasonally-adjusted quarter-on-quarter basis, slightly above the preliminary estimate of a 2.0% expansion (Q1: +0.1% s.a. qoq). The upturn was partly thanks to the easing of Covid-19 restrictions. On an annual basis, economic growth accelerated to 7.7% in Q2, contrasting the previous quarter's 2.0% fall, and thus the economy returned to pre-pandemic levels. Q2's annual reading marked the best result since Q4 1997, although it was flattered by a favorable base effect.
Domestically, the quarterly result was driven by private consumption, which grew 1.9% in seasonally-adjusted quarter-on-quarter terms in Q2 following a 0.2% contraction in Q1. The result was likely bolstered by higher employment levels in the quarter, coupled with increasing nominal wages and salaries, which contributed to consumers turning optimistic. Moreover, fixed investment growth sped up to 1.3% in Q2 from 0.1% in the prior quarter. Government spending, meanwhile, grew 0.7% in the period (Q1: -0.2% s.a. qoq).
Turning to the external sector, exports of goods and services bounced back, growing 0.3% in Q2 (Q1: -6.4% s.a. qoq). In addition, imports of goods and services rebounded, growing 1.5% (Q1: -0.2% s.a. qoq). Consequently, the external sector subtracted 0.4 percentage points from the overall result, easing from Q1’s 0.5 percentage-point detraction.
Reflecting on the second quarter’s result and on the outlook for the remainder of the year, Sonja Liukkonen, economist at Swedbank, noted:
“Finland’s output grew 2.1% from the previous quarter in the second quarter of 2021. Similar to other Nordic countries, overall production has now hit pre-crisis levels. […] Growth was fastest in private consumption […]. However, [it] is still below its pre-pandemic level. […] The economy is now moving in the right direction, and while the Delta mutation could affect the recovery going forward, confidence in the economy has remained mostly upbeat.”
Author: Marta Casanovas , Junior Economist