Finnish economy faces recession: EK

The outlooks of Finnish companies have worsened to crisis levels, according to the October Business Tendency Survey commissioned by the Confederation of Finnish Industries (EK).

The global economy is currently under exceptionally high stress, which uncertainty also readily reflected in the Finnish economy, said the EK in a press release on Thursday, referring to the survey.

“The Finnish economy is now in recession. How long and deep the recession will be remains to be seen. Geopolitical tensions and the war in Europe are sustaining an exceptionally high level of uncertainty. On the other hand, news that Europe’s natural gas reserves are filling up is a ray of light amidst the gloom. The direction that the German economy takes will indicate Finland’s path, too,” said Sami Pakarinen, Director of the Confederation of Finnish Industries.

The deterioration in the situation is also reflected in companies’ expectations regarding production and sales performance. The situation was somewhat sustainable in the early autumn, but demand issues have now become the principal obstacle to business growth.

“The rise in costs and declining demand are hurting profitability. Employment growth expectations are also waning, a significant proportion of companies are already planning lay-offs, and the labour shortage has already started to ease slightly. At the same time, companies had responded to supply chain issues by increasing stocks, but this demand is also declining,” Pakarinen said.

The fluctuations of the global economy are palpable in the daily life of export companies. The actions taken by central banks to fight inflation are having a significant impact on construction, and the decline in consumer confidence is hurting services.

“The weakening in order books is evident in manufacturing, and the rapid rise of interest rates and increase in the supply of housing are slowing construction. Consumers’ purchasing decisions are exerting negative pressure on services, instead of supporting growth as was expected. Even though consumer confidence has collapsed and is historically low, households are still holding up. The big question is how long this will last once employment starts to decline,” Pakarinen added.

The Business Tendency Survey is published four times a year by the EK. In October, the EK asked businesses to evaluate their business outlook for the third quarter of 2022. A total of 1,128 companies employing about 235,000 people in Finland responded to the survey.