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Nordea downgrades Finnish economy outlook

Russia's invasion of Ukraine and China's recent Covid crackdown are keeping financial growth prospects more modest than initially expected, the bank says.

Ihmisiä ruokakaupassa.
Despite the drop in real incomes, savings accumulated by households will help sustain consumer consumption, according to Nordea. Image: Henrietta Hassinen / Yle
Yle News

Nordea Bank is predicting that the Finnish economy will see growth of two, rather than three, percent this year.

The bank says its outlook figures are lower than its earlier projection due to the geopolitical situation surrounding Russia's war on Ukraine as well as China's stringent zero-Covid policy.

Its outlook in January, nearly two months ahead of Russia's attack, predicted an estimated growth of two percent in 2023. Its updated projection for 2023 is 1.5 percent.

Nordea says that geopolitics and new resistant coronavirus variants are strongly affecting the global economy and exacerbating the rising inflation rate. Central banks have recently begun tightening monetary policies and interest rates are expected to rise even further, according to the bank.

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"The Nordic economies will also be affected by the war in Ukraine. However, they all benefit from having had a strong starting point before the war, when the risk of overheating was the common Nordic economic narrative. Finland will be affected the most, Norway the least," Nordea says in its press release.

But while inflation and accelerating interest rates increasingly weigh on Finnish household finances, Nordea says that the situation is somewhat counterbalanced by some eight billion euros in savings that households accumulated over the past years of the Covid crisis.

"Savings accumulated by households will help sustain private consumption despite a fall in real incomes," the statement reads.

Thus, despite the plethora of hindering factors, the overall growth trend for Finland is expected to remain upwards albeit at a more gradual curve than first predicted, Nordea says.

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