Finland: GDP growth moderates slightly in final quarter of 2021
Economic growth lost some steam in the last quarter of 2021, but remained solid, with GDP expanding 0.6% in seasonally-adjusted quarter-on-quarter terms, and matching the preliminary estimate. That said, growth eased from the previous quarter’s 0.9% reading. Meanwhile, on an annual basis, the economy grew 3.5% in Q4, decelerating marginally from the previous quarter’s 3.6% increase. Consequently, the economy expanded 3.3% in 2021, recovering robustly from the prior year’s pandemic-induced 2.3% contraction.
Domestically, the quarterly moderation was due to private consumption growth softening to 0.2%, down from the previous quarter’s 1.5% increase, likely due to downbeat consumer sentiment as Covid-19 cases rose and price pressures mounted in the period. That said, a lower unemployment rate and higher employment levels, coupled with increased nominal wages and salaries likely avoided a larger moderation. Moreover, government spending flatlined in Q4 (Q3: +0.7% s.a. qoq). This, more than offset fixed investment rebounding in Q4, with growth coming in at 3.2%, contrasting the prior quarter’s 2.2% decline.
Turning to the external sector, exports of goods and services growth accelerated to 8.3% in Q4, up from Q3’s 4.4%. Similarly, imports of goods and services also increased at a brisker pace, with growth coming in at 4.7% (Q3: +3.1% s.a. qoq). Consequently, the external sector contributed 1.3 percentage points to the overall result in Q4, markedly above the prior period’s 0.4 percentage-point contribution.
With regard to the year ahead, analysts at the EIU reflected:
“The domestic labour market remains strong, and consumer spending is likely to drive growth in 2022. Nevertheless, we expect growth to ease in 2022. […] Higher global commodity prices will inevitably feed into consumer price inflation in Finland and erode purchasing power for domestic consumers. There is an upside risk scenario, however. As Russian crude is being offered at record discounts to its Brent counterpart, and the rouble has depreciated sharply, if Finnish buyers choose to accept Russian oil (and the discounts prevail), this could soften consumer price growth in Finland.”