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Dip in consumer confidence, guarded growth forecast spell trouble for Finnish economy

Confidence indicators for consumers and businesses have dropped while research institute Etla downgraded its 2019 growth forecast forecast.

Joulukauppaaa kauppakeskus Jumbossa.
Image: Markku Rantala / Yle

A recent release from Statistics Finland shows that consumer confidence weakened in December. The indicator that measures the degree of optimism among Finnish consumers stood at 16.1 in December, down from 18.3 in November and 24 in December last year.

Expectations among consumers with regard to the national economy, their personal finances and general unemployment development all weakened in December. Nonetheless, consumer confidence remains above the long-term average of 12.7, the statistical agency said.

Similarly, the Confederation of Finnish Industries EK reports that manufacturing confidence saw a moderate decline in December. The indicator fell to +2 points, down from +6 in November. Its long-term average is +1, EK said.

Etla lowers growth forecast

There are also other signs that point to a slowdown in Finland’s economic growth. On Friday, the Research Institute of the Finnish Economy Etla said it expects GDP to grow at a more moderate pace next year than the previously forecast 2.2 percent.

Because of its small size, Finland is sensitive to fluctuations in the global economy and market sentiment, which have recently become more pessimistic, Etla said in a statement.

Etla director Vesa Vihriälä considers the developments in the UK significant and says Britain will likely organise a new referendum on its relationship with the European Union. "The alternatives are either accepting PM May’s agreement, a no-deal Brexit or remaining a EU-member," Vihriälä said.

"With some luck, the last option will gain the most votes," he added.

Housing prices rise

Nevertheless, housing prices have not fallen. Figures from Statistics Finland indicate that prices for old flats in housing companies in Finland rose by one percent in November compared with the same month last year.

Growth was steepest in the Helsinki region, where prices increased three percent year-on-year, and in Turku which saw a 6-percent price rise.

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