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Finland GDP Q1 2023

Finland: Economy records best result since Q2 2022 in Q1

GDP bounced back at the outset of 2023, increasing 0.2% on a seasonally adjusted quarter-on-quarter basis in the first quarter. This contrasted with the 0.6% contraction seen in the fourth quarter of last year. Q1’s reading marked the best result since Q2 2022.

Domestically, the improvement in output was spearheaded by increased spending. Household consumption rebounded, growing 0.1% seasonally adjusted quarter on quarter in Q1, which marked the best reading since Q2 2022 (Q4 2022: -0.8% s.a. qoq). Government consumption also improved from the previous quarter’s slump, growing 3.1% in Q1 (Q4 2022: -0.3% s.a. qoq). Meanwhile, fixed investment contracted at a steeper pace of 3.0% in Q1, marking the worst reading since Q1 2010 (Q4 2022: -2.6% s.a. qoq).

On the external front, exports of goods and services declined at a slower rate of 0.1% in Q1 (Q4 2022: -2.2% s.a. qoq). Conversely, imports of goods and services contracted at a sharper rate of 2.7% in Q1 (Q4 2022: -2.3% s.a. qoq), marking the worst reading since Q2 2020.

On an annual basis, economic activity declined at a slower pace of 0.1% in Q1, from the previous period’s 0.2% decrease.

Looking ahead, our panel sees the Finnish economy flatlining in Q2. Above-target inflation and elevated energy costs will continue to stifle household spending. Meanwhile, weakening activity across the Eurozone, as well as sanctions on Russia and Belarus, will hinder growth in the external sector. That said, a strong labor market will support consumption somewhat. Tighter global financing conditions, volatility in energy prices and sticky inflation pose major risks to the outlook.

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