Domestic Demand in Finland

Finland Domestic Demand | Economic News & Forecasts

Finland - Domestic Demand

Economic growth ticks up in Q3 after a good start to 2018

Economic growth accelerated in the third quarter of 2018 compared to the second quarter. According to GDP data released by Statistics Finland, the economy grew 0.4% in seasonally-adjusted quarter-on-quarter terms in Q3, up slightly from Q2’s 0.3%. In year-on-year terms and adjusted for working days, the expansion inched up to 2.4% in Q3 from a revised 2.3% in Q2 (previously reported: +2.2% year-on-year).

Higher quarter-on-quarter growth in Q3 was primarily underpinned by stronger government consumption, which rose 0.3% in the quarter compared to Q2’s flat growth. On the other hand, private consumption dragged on the overall expansion as it fell 0.5%, contrasting 0.6% growth in Q2. Lower private spending came amid a drop in consumer confidence and despite a small decrease in the unemployment rate. Furthermore, fixed investment contracted even more sharply in the quarter (Q3: -1.4%; Q2: -0.2%).

Exports of goods and services decreased 1.8% in Q3 from the previous quarter, representing a deterioration compared to the 1.2% fall in Q2. Imports, however, increased 0.5% in the third quarter, contrasting the 0.2% decrease in Q2. Overall, the external sector detracted 1.0 percentage points from economic growth in Q3, more than the 0.4 percentage-point deduction in Q2.

Going forward, private consumption should have a spring in its step next year thanks to a strengthening labor market. Government consumption, for its part, is unlikely to expand quickly considering the tight budget proposed by the center-right administration of Prime Minister Juha Sipilä. In addition, historically-loose monetary policy should continue to boost the economy by feeding into fixed investment growth next year, as should high business confidence. Meanwhile, exports ought to continue to benefit from increased international competitiveness on the back of Finland’s 2016 Competitiveness Pact.

The Bank of Finland expects the economy to expand 1.7% in 2019. FocusEconomics panelists see the economy expanding 2.1% in 2019, which is unchanged from last month’s forecast. In 2020, the panel project that GDP will expand 1.8%.

Finland - Domestic Demand Data

2013  2014  2015  2016  2017  
Domestic Demand (annual variation in %)-1.1  -0.1  1.3  2.8  2.1  

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ValueChangeDate
Bond Yield0.573.70 %Dec 11
Exchange Rate8.57-0.38 %Dec 12
Stock Market3,8350.0 %Dec 12

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