Finnish economy predicted to drop 5.5 pct in 2020

Source: Xinhua | 2020-04-17

The Finnish Ministry of Finance on Thursday predicted that the Finnish economy would shrink by 5.5 percent this year, but a worse alternative would mean a 12 percent drop.

In its primary prognosis, the ministry believed the major decline in the Finnish gross domestic product (GDP) would be seen during the ongoing Q2, but then growth would resume. For 2021 and 2022, the ministry forecasts a 1.3 percent growth.

The prognosis presumes that the current COVID-19 restriction measures will not exceed three months. The ministry estimated that each month of the current policies will diminish Finnish GDP by up to two percent.

The alternative scenario published by the ministry is based on six-month restrictions, which would cause a 12 percent decline in GDP.

Mikko Spolander, director general of the Economics Department at the Ministry of Finance told a press conference that while the predictions by several Finnish economic research institutes varied during the first weeks of the crisis between drops of one and five percent, the predictions have of late been around five and six percent.

Finnish recovery requires that closure measures would cease throughout the world. "Growth cannot continue for a longer time on the basis of domestic demand," Spolander said. "Internationally, China seems to be recovering already, but the United States is a major question mark," he added. The world economy would shrink by two percent in 2020, and world trade by five percent, the ministry gave as part of its prediction.

With a more cautious approach, the Research Institute of Finnish Economy (ETLA) noted on Wednesday that the decline in Finnish GDP would be at least five percent, "but probably closer to ten percent." Markku Lehmus, head of forecasting at ETLA, believed recovery would not get momentum until Q4.