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Nordea boosts economic outlook, but analyst warns of political risks

Nordic financial giant Nordea Bank has vastly improved its outlook on Finland's economic growth for this year. Nordea says that the Finnish economy will grow by three percent in 2017, more than doubling its earlier prognosis of 1.3 percent. But the bank's chief strategist has warned that the election of nationalist Jussi Halla-aho as Finns Party leader "will have big consequences".

Kolikoita Nordean logolla varustetussa säästöpossussa.
File photo. Image: Ismo Pekkarinen / AOP

Nordea Bank has updated - and improved its outlook for economic growth in Finland. The bank says that it expects the Finnish economy to grow by three percent, more than double its previous assessment of 1.3 percent growth.

But in coming years, the bank says, growth will likely be slower and warned that this coming autumn's collective bargaining wage negotiations should not be based on what it called a temporary economic upswing.

The bank said that wages went up by two percentage points in Sweden and Germany this year, but noted that Finland should be more modest in its wage plans. The bank said if Finnish wages are set too high, it would result in damaging the country's competitiveness improvements and could potentially hurt Finnish exports.

In its outlook, Nordea also said that Finland cannot afford a government crisis or setbacks on planned reforms.

Nordea strategist's dismay

Over the weekend, the Finns Party elected anti-immigration stalwart Jussi Halla-aho as party chair - a development which has caused more than a bit of political turmoil and prompted news headlines of a potential governmental crisis.

On Monday Prime Minister Juha Sipilä is scheduled to meet with Halla-aho, National Coalition Party chair Petteri Orpo and others to figure out in which form the government will move forward.

Nordea's Chief Strategist Jan von Gerich told the business publication Talouselämä that he sees Finland's new political landscape as fraught with potential economic hazards.

"Just as the Finnish outlook was starting to look a bit better, a political crisis hits," von Gerich tweeted on Monday, with a link to an article he wrote on the topic.

jan-von-gerich-twitter-20170612
@JanVonGerich Image: Twitter

In his Nordea-hosted post, von Gerich wrote:

"Just as it was starting to look better after years of disappointments, a government crisis emerges to threaten the Finnish outlook. While we don’t expect big near-term market moves, another delay of needed reforms would hurt the medium-term outlook," he wrote.

"Ever since the Finns Party, currently the second-largest government party, moderated its stance in preparations to join the government, Finland has lacked an extreme alternative in a sense most other European countries currently have. All this changed during the weekend, as the Finns party elected Jussi Halla-aho its leader. While his election was not a big surprise, it will have big consequences," von Gerich wrote.

von Gerich told Talouselämä that even if the government remains intact, it is unlikely that it will be unified, saying that Halla-aho's victory would be a setback for government's ongoing reform plans - which have been in the works for more than two years.

Improved global economy helps

Nordea attributed its improved 2017 outlook to the recent brightening of the global economy as well as improved domestic export figures.

The bank said it believes that the global economy will likely continue its upward swing until the end of the decade. It said that Finland's export numbers were exceptionally strong, saying that similarly good figures have not been seen since the beginning of the financial crisis.

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