Finland: GDP fell in Q2, weak second half of 2012
19 OCTOBER 2012
Weak global demand is taking its toll on Finnish growth (Chart 1).
In the first quarter of2012 GDP grew by 0.9%, followed by a fall of 1.1% in the second quarter.
Withcontinued international weakness and our outlook for major export markets (Sweden,Germany, Russia) revised downward, it will be a close call whether Finland manages toavoid a new recession (two consecutive quarters of falling GDP) or not.
In the second quarter exports, household consumption and capital spending allfell
compared to the first quarter. Weak household consumption was expected, as thefirst quarter was boosted by unusually high new car registrations due to tax changes.During the past year, Finnish exports have performed worse than Germany and Sweden.
Leading indicators have weakened for most sectors of the economy in recentmonths
(Chart 2) and performance during the second half of the year will remain weak.Manufacturing output has basically been unchanged for a year, and given the weakinternational trend it is difficult to find a trigger for a near term increase (Chart 3).
Although a weak trend during the rest of 2012 was already in the pipeline according tothe August
, performance since then has been weaker than expected. Weare revising our
GDP forecast to 0.3% in 2012, 1.3% in 2013 and 2.0% in 2014
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2011 2012 2013 2014
GDP 2.7 0.3 1.3 2.0Unemployment
7.8 7.8 8.3 8.3Inflation 3.3 3.2 2.3 2.1Government fiscal balance** -0.5 -0,8 -0.5 -0.2
* Per cent of labour force, ** Per cent of GDPSource: SEB