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Forecast: Finnish economy to trail rest of EU in 2021

The EU Commission's forecast for an economic slump in the eurozone was more pessimistic than spring projections.

Kuvassa liehuu Euroopan unionin lippu.
According to the EU Comission's forecast, Finland's growth is lagging behind other euro zone countries. Image: Silja Viitala / Yle

Finland's economic growth next year will be the slowest in the EU, according to an EU Commission economic forecast released on Tuesday. It predicts that the Finnish economy will shrink by 6.3 percent this year and grow by just 2.8 percent next year.

Overall, the Commission's view of a potential economic downturn was more pessimistic than previous projections.

The Commission says that eurozone economies will decline by 8.7 percent this year and grow by 6.1 percent next year. A previous spring forecast published in May estimated the economic contraction at 7.7 per cent.

The spring forecast had already concluded that economic growth in Finland in 2021 -- estimated at 3.7 percent -- would be the weakest among EU member states, but now the numbers look even bleaker.

The economic impact of measures taken to limit the coronavirus pandemic and the slow rollback of restrictions has been more severe than expected, according to the Commission’s executive vice president Valdis Dombrovskis.

"We are still sailing in stormy waters and we are facing many risks, including a significant new wave of infection," Dombrovskis warns.

However, according to the Commission, preliminary figures for May and June suggest that the worst is over and an economic recovery is expected to accelerate towards the end of the year. Dombrovskis points out that the EU now needs to be vigilant about uneven recovery across the bloc.

Uncertainty in the forecast

The economies of many other EU countries will shrink more significantly than Finland's this year. For example, the Italian economy is expected to contract by 11.2 percent, Spain by 10.9 and France by 10.6 percent.

The Italian economy is projected to grow by more than six percent next year, while expansion will exceed seven percent in Spain and France.

Sweden joins Finland at the tail end of the forecast, with a growth next year estimated at just 3.1 per cent. This year, the Swedish economy is expected to shrink by 5.3 percent.

According to the Commission, economic growth in Finland will largely depend on domestic demand and could be fettered by rising unemployment, among other factors.

The forecast assumes that there would be no significant second wave of the pandemic. It notes that there is a great deal of uncertainty in the forecast and that numbers can fluctuate in either direction.

The Commission points out that Finland's economic growth may also pick up if trading partners recover from the crisis faster than expected.

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