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Finnish GDP contracts slightly, but outlook still strong, say economists

Finland's gross domestic product edged downward in early 2021, rather than growing slightly as economists expected.

Finnair Cargo terminaali. 5.5.2021.
Exports declined while imports rose between January and March. File photo of a Finnair Cargo terminal in early May. Image: Jorge Gonzalez / Yle
  • Yle News

According to Statistics Finland, the nation's economy contracted slightly in the first three months of this year. It said that GDP dipped by 0.1 percent from the previous quarter and by one percent compared to last year's corresponding figure.

While economists had expected a slight rise in GDP, most downplayed the significance of the downturn.

Handelsbanken's Chief Economist Timo Hirvonen said that the setback does not change the big picture of the Finnish economy.

"We expect economic activity to accelerate in the second quarter of this year, and the fastest growth period to take place in the third quarter of 2021, when restrictions are lifted and pent-up household demand begins to be released," he told the business daily Kauppalehti on Friday.

Economy weathered the pandemic winter well

Danske Bank economist Jukka Appelqvist agreed, saying that while the figures show a hiccup in the Finnish economy, they do not fundamentally change the outlook. In his view, the economy has weathered the pandemic winter well.

He pointed to investments, which rose by 1.4 percent in the January-March period.

"The main bright spot is the positive development of investments. Industrial investment in equipment and construction increased compared to the last quarter of last year, although they were still below the level of a year ago," said Appelqvist.

Meanwhile, demand was weak during the first quarter.

Exports dipped by five percent in the first quarter, compared to the previous quarter. Exports of both goods and services decreased, compared to the end of last year. In contrast, imports increased by 1.4 percent between January and March.

Private spending decreased by 0.7 percent and public expenditure by 1.3 percent, compared to the previous quarter.