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Finland's GDP growth to contract over next 2 years, Nordea outlook says

The economies of Finland and other Nordic countries are still improving, but the escalating global trade war is gaining momentum, according to Nordea Bank.

haminan energia tuulivoimala hamina
The busy port at Hamina in southeast Finland. Image: Kari Kosonen / Yle

Nordic banking firm Nordea said the Finnish economy is continuing to expand along a "healthy growth track," attributing the expansion to consumption driven by improved labour markets and wage development. The bank issued its economic outlook on Wednesday.

According to official national figures, Finland's employment rate has improved over the past year. In July state-owned number cruncher Statistics Finland reported the trend of the employment rate was 71.9 percent, just shy of the 72 percent employment target that Prime Minister Juha Sipilä's government set when it took office four years ago.

On Wednesday however, Nordea warned that Finland's employment growth "is likely to cool as the labour market mismatch takes a negative turn."

Growth will slow

The bank noted that export growth in Finland has already slowed and said it expects that expansion of export markets will continue "to cool further in the coming years."

The bank projected GDP growth of three percent this year and two percent next year, while growth would further contract to 1.5 percent in 2020.

Nordea's forecast for this year is in line with competitor bank Aktia's recent outlook, which also predicted three percent growth in 2018. However Aktia expected slightly more growth of 2.2 percent in 2019.

On a worldwide scale, Nordea said it expects global GDP to grow by 3.8 percent this year, slightly contracting over the next two years, to 3.4 percent growth in 2020.

"The global economy entered 2018 with positive momentum. While the relatively strong growth is set to continue, a slowdown is already taking place. Still, we expect growth to hold up relatively well in 2019, before a more material slowdown hits in 2020," the bank wrote in its economic outlook published on Wednesday.

Edit: Updated at 7.07pm to correct headline to refer to GDP growth instead of GDP.

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