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Economic growth slowing, still some bright spots for households

OP Financial Group forecasts slower but reasonable growth in Finland's economy.

Hitsari työssään.
OP expects to see 1.6 percent growth in the Finnish economy this year. Image: Niko Mannonen / Yle

In a report published on Tuesday, OP Financial Group says Finland’s economy is continuing on a good track. The bank's economists estimate the rate of growth will gradually go down but that the overall economic situation will remain reasonably good for the most part.

However, OP says the broadening international trade war and the resulting uncertainty dampens the outlook.

The financial group's economists say they do not see any reason to revise their earlier economic forecast and still predict a reasonable 1.6 percent growth for the Finnish economy this year and slower 0.8 percent growth for the following year.

Exports will still be reasonably good this year, driven by ship deliveries among other things, but in 2020 the pace will decelerate.

Meanwhile, home market consumption is seen as still having good growth potential, but weakening confidence means that consumption is poised to grow less than incomes. OP notes that investment growth slowed down noticeably in 2018 and a decline in construction will keep investment development modest in 2020.

Still good for households

Despite the sluggish growth, the unemployment rate is likely to remain at its lowest level since the early 1990s in 2020 as well, at just 6.2 percent. OP's forecast is for the employment rate to rise to 73.5 percent next year.

“Many factors still support households. Employment is improving, moderate inflation supports real incomes and expectations for loan interest rates are even more moderate than before. Yet the weakening economic situation is making also households more cautious, which is already visible in the higher saving ratio," Senior Economist Henna Mikkonen stated in a Tuesday OP Financial Group release.

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