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Finnish Economy Still Struggles

James Boston
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www.finances.com
Finnish Economy Still Struggles

Finland’s economy doesn’t appear to be showing the required signs of activity according to the latest Producer Price Index data. The year on year data just published shows that prices in the sector have increased their rate of decline to -0.8% from -0.5% the previous month, a market expectation for a moderate pick up to -0.4% was missed.

Unlike many of it’s Scandinavian neighbours the Finnish economy has been struggling to gain a foothold on the recovery ladder. This is an unnatural situation for Finland that has traditionally held a solid economic performance record and it is thanks to this historically astute behaviour that the country has a solid economic foundation on which to weather the current economic storms. Finland’s public debt to GDP is comfortably in the mid 50’s and it enjoys a strong credit rating, although obviously not desirable there is ample scope to raise funds if required and at a reasonable interest rate.

Finland has only managed one positive GDP growth quarter from the last nine and most observing economists are predicting that 2014 will be another year of contraction with only marginal growth forecast for 2015. Based on this there is every possibility that the Finnish economy could experience up to four straight years of recession, particularly if international conditions don’t pick up. This latter point is a very real problem, Finland is very vulnerable right now to any further shocks to the economy and the situation in the Ukraine is starting to hurt. Finland, although fully supportive of EU sanctions against Russia, is the one European nation with the most to lose if the situation continues to escalate. It is not just the sanctions that are causing the problems for Finland, the country has traditionally held close trade links with Russia and it is very sensitive to a downturn in demand in it’s larger trading partner. Even if the sanctions are lifted the Russian economy will need to recover in order to assist it’s Scandinavian trading partner.

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