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Nordea Bank: Only a miracle can revive Finnish economy

The Nordea banking chain raised eyebrows last summer when it declared that Finland's ongoing recession could be considered an economic depression. On Wednesday Nordea continued its bleak forecast in a new economic outlook stating that prospects for bringing Finland back into the black are poor.

Nordea Bank is headquartered from Stockholm and has more than 1,400 branches in 19 countries. Image: Essi Peijariniemi / Yle

Established between 1997 and 2000 after successive mergers and acquisitions of Finnish, Danish, Norwegian and Swedish banks, Nordea Bank made no changes to this year’s economic forecast in its statement, but lowered its forecast for 2015 by half a percentage point. Nordea interprets next year’s weak growth to mean that Finland is “only one shock away from a fourth year of contraction”. Even the depression that hit Finland in the early 1990s did not see such figures, the outlook points out.

A modest pick-up in Finland’s economy is not expected until well into 2015, says the bank in its most recent economic outlook, released on Wednesday. According to Nordea, only a miracle can turn the economy around in Finland within the current year.

The financial group estimates that this year’s growth will retract by half a percent from the previous year, and gross domestic product will grow by only 0.3 percent next year. Nordea predicts only 1.3 percent growth by 2016. According to the outlook, Finland will only regain its 2007 GDP levels in 2017.

Ready for the next blow?

This meagre growth means that Finland will be in a weak position to receive the next blow striking the world economy, warns the bank.

For the time being, Finland’s credit rating is still the best rating possible. This has meant that Finland has been able to borrow money with reasonable rates and minimum debt servicing costs. This scenario could be endangered, says Nordea, and losing the highest credit rating will “only be a matter of time”.

Nordea released its last economic outlook in June. The outlook gained widespread attention after the bank said that Finland’s continuing recession could in fact be classified as a depression, even if there is no universal definition of the concept.  

It lists several reasons for the worsening economic situation in Finland: tax increases have cut into household purchasing power and sanctions against and from Russia are weighing down the economy. Uncertainty about the future makes households and companies cautious.

The bank chain’s forecast for growth in the entire eurozone is 0.8 percent for 2014 and 1.1 percent for 2015.

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