According to the latest data from Statistics Finland, the country’s gross domestic product (GDP) shrank by 0.6% in the last quarter of 2022 compared to the previous quarter, which is significantly worse than previous estimates. Just two weeks ago, Statistics Finland predicted that GDP would shrink by 0.2 percent.
Despite this, GDP for the whole year grew by 2% compared to the previous year. However, according to Appelqvist, this number only reflects the so-called legacy of growth and the recovery at the beginning of the year.
In the second half of the year, the economic downturn has now continued for two consecutive quarters, which is a common criterion for a recession. The economic crisis triggered by the Russian attack has been characterized by a gradual deterioration of the situation, driven by high inflation and tightened monetary policy. In the last quarter of the year, the recession intensified, when all sub-groups of GDP shrank, which made it difficult to find bright spots.
However, Appelqvist does not believe that this situation constitutes a complete collapse. He remains optimistic and said things could have been much worse. However, he admits that all major categories of demand, including exports, investment and consumption, declined as private consumption continued to fall as inflation eroded the purchasing power of wage earners.
Appelqvist explains the decline in private consumption as the reason for the increase in interest costs and expensive electricity bills, which left little room for other expenses. However, he also notes that households have coped well with the situation and the decline in consumption has been relatively moderate. However, he estimates that private consumption will remain weak for several months until wages pick up later this year, supporting a recovery in purchasing power.
Source: The Nordic Page