GDP shrinks by 2.8% in 2020

The volume of Gross Domestic Product (GDP) fell by 2.8 per cent in 2020, according to Statistics Finland.

The fall became slightly revised from February’s quarterly national accounts as the data on general government finances were updated. The data in February showed 2.9% fall of the GDP in last year.

Wages and salaries received by households fell in nominal terms by 0.4 per cent to EUR 92.8 billion. In the previous year, wages and salaries went up by 3.5 per cent.

Received social benefits other than social transfers in kind increased by 5.4 per cent to EUR 47.6 billion.

This was particularly due to the 2.6 per cent growth in employment pensions paid to EUR 29.4 billion and the 38 per cent growth in unemployment benefits paid to EUR 5.0 billion.

Households' saving rose to EUR 6.9 billion (EUR 1.0 billion in 2019). This was affected by the 0.5 per cent growth in disposable income to EUR 133.1 billion and by the 4.6 per cent decrease in consumption expenditure to EUR 115.2 billion.

Saving grew faster than disposable income as consumption expenditure fell clearly. As a result, households' saving rate grew to 5.7 per cent in 2020. According to preliminary data, households’ indebtedness rate rose to 133 per cent in 2020 having been 129 per cent in 2019.

The financial position, or net lending, of general government showed a deficit of EUR 12.9 billion. In the previous year, the deficit was EUR 2.4 billion.

General government deficit was boosted by expenditure related to the coronavirus pandemic and the decrease in the accrual of tax revenue and social security contributions, the main individual items of which were reductions in corporation taxes and employment pension contributions. In 2020, the deficit was 5.4 per cent relative to GDP.

The deficit of central government was EUR 13.4 billion, while one year before it was EUR 2.7 billion.

According to preliminary data, local government (municipalities and joint municipal authorities, etc.) was in surplus after a long time, EUR 175 million.

Central government contributed to the costs of the corona pandemic in local government and the deficit of local government turned into surplus as central government transfers to local government grew.

The surplus of employment pension schemes contracted considerably as dividend income and received social security contributions decreased, to around EUR 429 million. The surplus does not include holding gains in assets. The financial position of other social security funds also weakened, being EUR 158 million in deficit.