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Etla: Coronavirus could shrink Finnish economy up to 5%

Minimising the economic fallout from the pandemic requires joint action within Europe and controlling the outbreak.

Kuvassa saapuvien ja lähtevien koneiden aikataulunäyttö Helsinki-Vantaan lentokentällä 4. maaliskuuta 2020
National airline Finnair slashed flight capacity by 90% as the pandemic stifled passenger traffic. Image: Antti Aimo-Koivisto / Lehtikuva

The novel coronavirus pandemic could see the Finnish economy shrink by up to five percent this year, according to ETLA Economic Research (Etla), a business-lobby backed research organisation.

Etla said on Tuesday that the economy could contract by between one and five percent this year and noted that the impact of the virus could be minimised if the outbreak is brought under control in Europe and if the region could agree on intensive stimulus measures.

"However at the moment the most positive baseline scenario seems unlikely. We estimate that at the negative end of the scale (five percent contraction) seems highly likely now," Etla forecast chief Markku Lehmus said.

According to the think tank's estimates, economic activity will decline by nearly 10 percent between April and June, before picking up again. Etla CEO Aki Kangasharju said that the projection is based on assessments in the West of how the Chinese economy behaved during the peak of the novel coronavirus epidemic there.

"According to these analyses, between January and February, China's economy shrank by up to 13 percent, but during March it already recovered. We assume that Europe and Finland will not adopt equally robust measures to prevent the spread of the virus, so the economy will not slow as much, but the impact of the virus will be longer-lasting," Kangasharju said in a statement.

The organisation said that actions designed to stop the spread of Covid-19, the disease caused by the virus, will create major financial costs.

Ordering quarantines, shuttering service businesses and moving schooling online will make it difficult for employees to report to work. At the same time, the demand for services, especially in the tourism, hospitality and entertainment sectors will fall, the think tank pointed out.

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