Finnish economy: slowing growth Confidence is frustrated

【Reporter's Connection: The World Under the Influence of the Russian-Ukrainian Conflict】

Guangming Daily correspondent in Helsinki Zhang Zhiyong

After surviving several rounds of COVID-19, the Finnish economy recovered and grew by 3.3% in 2021. Regrettably, however, this trend has now been completely interrupted by the Russian-Ukrainian conflict and the rounds of European sanctions against Russia. At present, Finnish prices are rising rapidly, inflation is at an all-time high, and the economy is threatened with a possible recession, especially the daily lives of low-income people, single people and single-parent families are most obviously affected.

A petrol station of the Finnish company NESTE, photographed on June 29, shows signs showing that No. 98 gasoline has risen to 2.699 euros per liter. Photo by Zhang Zhiyong/Guangming Image

The economy faces the threat of recession in the future

On June 21, the Bank of Finland issued a report saying that the Conflict between Russia and Ukraine had weakened Finland's economic prospects, predicting that Finland's economy would grow at just 1.7 percent in 2022 and slow to 0.5 percent in 2023. Finland's inflation rate will remain high at 5.6% in 2022 due to supply chain problems and rapid price increases. The report believes that if the Conflict between Russia and Ukraine continues and energy and commodity prices continue to rise, it is not excluded that the Finnish economy will fall into recession as a result. The report also said that in a worst-case scenario, the entire eurozone economy could fall into recession.

A June 17 report by the Finnish Ministry of Finance was also pessimistic, saying that the Russian-Ukrainian conflict had overshadowed Finland's economic outlook and that Finland would face a recession if it continued to do so in the coming years. Spaland, director of the Department of National Economy at the Ministry of Finance of Finland, said the economy was not expected to collapse, but the outlook for economic growth remained subdued. As the prices of energy, food and other goods and services continue to rise, the purchasing power of Finnish households is weakening at an accelerated rate, and the prospects for household consumption are deteriorating in the coming years.

Ilavo, an adviser to the Finnish Ministry of Finance, said finland's export performance this spring was weaker than expected due to the decline in exports to Russia and the slowdown in consumption growth in other exporters. Pokunin, another finance adviser, said Finland's general government debt as a share of GDP is currently close to Germany's, but has tripled that of Sweden and Denmark. The ECB has hinted that accommodative monetary policy is coming to an end and is expected to raise major interest rates this month and autumn to curb the acceleration of inflation, so the structural imbalances in Finland's budget deficit must be resolved in the short term.

A few days ago, Finnish Prime Minister Marin said at the European Council that rising energy prices are the root cause of current inflation, but it is difficult to solve, mainly because fossil energy is heavily dependent on Russia. Marin, concerned about Europe's deteriorating gloomy economic outlook and inflation, reluctantly acknowledges that there is no simple solution to the situation and that the negative effects of inflation will be difficult to avoid. Marin called on the EU to exercise restraint in its decision to adjust its economic policies and avoid panic-stricken solutions that would further disrupt the market.

Finland's leading economists generally agree that the Finnish economy is already threatened with recession, but there is still a chance to avoid the worst. Kuopamaki, chief economist of the Finnish branch of the Bank of Denmark, pointed out that Finland's exports to Russia are stagnant, it is difficult to find alternative trading partners, residents' consumption demand is affected by sharp inflation, and interest rates will continue to rise. Finland's largest trading partner, Germany, has stopped growing exports, and the United States is at risk of falling into recession. Martinin, chief economist of the Finnish Association for Social and Health, believes that the greater impact of the Russian-Ukrainian conflict has not yet arrived, and that Europe and Finland are facing inflation levels that have not been seen in recent decades, and its impact on the future economy is difficult to predict.

Recently, the June Consumer Confidence Survey released by statistics Finland showed that Finnish consumer confidence is at an all-time low in the observation and measurement cycle since 1995, consumers are very pessimistic about the economic expectations in a year, and their current financial situation assessment is also very weak, most consumers have no plans to buy durable goods in June.

The Finnish confidence index continues to decline

Recently, Pakarinen, director of the Finnish Confederation of Industries, said that the business confidence index fell for the fourth consecutive month in June, which heralded a further deterioration in Finland's overall economic outlook. From June 6 to 8, the Finnish Chamber of Commerce surveyed nearly 2,000 companies in different industries and regions across the country, showing that due to the rising costs of enterprises due to the Russian-Ukrainian conflict, 72% of Finnish companies consider raising commodity prices in the next four months, and 29% of Finnish companies consider moderate or significant reduction of investment plans. Another survey conducted by the Finnish Trade Advocacy Group shows that the most vulnerable companies in the market today are energy-intensive enterprises and those with ties to Russia.

Roman Kaniemi, CEO of the Finnish Chamber of Commerce, believes that the Conflict between Russia and Ukraine has exposed the Finnish economy to strong inflationary challenges, and some soaring raw materials have an increasing impact on business costs and consumer prices, and related companies have to pass on increasing cost pressures to consumers. Roman Kaniemi assessed that some of the findings were polarized, and companies with ties to Russia were already significantly more affected. As inflation accelerates, the situation for companies that still have high growth expectations for the future could change in the blink of an eye.

The economic downturn has also had a more pronounced negative impact on Finnish venture capital. In the first half of this year, the Finnish stock market fell by about 20%, and the stock prices of startups fell sharply. Finnish private equity manager Mikola believes that in the past six months, the situation of Finnish startups has changed dramatically, and it is more difficult for companies to raise funds. Ahopelo, founder of Lifeline Investment, said that since April and May this year, the Finnish financing market has changed very rapidly, and now the market wind has completely shifted to stable investment.

Finnair, which has a majority of state-owned stakes, reported its ninth consecutive quarter of losses, again losing nearly 133 million euros in the first quarter of 2022. As a result of the company's flight ban imposed on Russia after the outbreak of the Russian-Ukrainian conflict, its operating environment has changed dramatically. The company's chief executive, Topi Manna, said the company's new strategy will turn attention to Middle Eastern countries, as well as North America and India, where middle eastern airports will play an increasing role in East-West traffic.

The Russian-Ukrainian conflict and sanctions against Russia have also created great uncertainty for Nokian Tire, which will severely limit the supply of Nokian tire products, and its net sales are expected to fall to pre-2021 levels. Nokian Tire has been operating in Russia since 2005, with 20% of its tire market in Russia and 80% of passenger car tires produced in Russia. The company will incur an impairment loss of about €300 million related to Russian assets in the second quarter of this year. Recently, Nokian Tire issued an announcement that due to the tightening of sanctions, the company will no longer be able to continue operating in Russia in a sustainable way, and will immediately begin to prepare and evaluate various exit options.

National life has been significantly affected

Finland unexpectedly experienced a "baby boom" during the COVID-19 pandemic, and finland's birth rate fell again earlier this year. Rotkic, a professor at the Finnish Population Association, believes that major factors such as uncertain economic prospects and lack of confidence in future security have led some Finns to postpone starting a family. Energy prices, mortgage rates and job prospects have become important factors affecting the "threshold" for starting a family. The Russian-Ukrainian conflict and sanctions against Russia have had a negative impact on the Finnish economy and the lives of its people, with rising prices and economic downturns limiting the "dream of having children" and will continue at least until next year.

Petri, 28, is married and does not want children due to financial and other reasons, and the couple hopes that the economy will get better as soon as possible, so that they are very willing to realize the "dream of having children". The O'Hara family of three, from a small town in eastern Finland, has always dreamed of having another child, but due to the difficulties caused by the epidemic and the Russian-Ukrainian conflict, they can only keep their dreams in their hearts for the time being.

Since the spring of this year, prices in Finland have risen sharply and are accelerating. According to a survey recently released by statistics Finland, 44% of Finns must change their consumption habits or abandon their purchases at least to some extent due to rising prices, and almost half of Finns have to postpone the purchase of bulky goods, with women being more affected.

Hannah, who came to Helsinki for a holiday from Tampere, told reporters that rising prices have led to a significant increase in the cost of living, and as a mother of three, she must carefully compare the prices of goods. Her eldest daughter, Ilona, said with some regret that the planned summer vacation self-driving trip had thus become a bus trip. Unable to work and study due to illness, 25-year-old Yushao is receiving a monthly disability allowance of 1,200 euros, in addition to the necessary electricity, rent, internet and food expenses, he has to buy furniture and appliances in installments. He told reporters that it was his dream to have a fitness card so he could get professional guidance from a fitness instructor.

Food prices in Finland rose rapidly this spring and are still accelerating. Prices rose more than 9 percent year-on-year in May, with the prices of foods such as fish, coffee and eggs rising the most, up 30 to 50 percent from the same period last year. Households spend an average of a third more on food per month compared to a year ago. For now, rising prices have had the biggest impact on the daily lives of low-income, single-person and single-parent families, who are forced to buy their daily necessities from discounted promotions at grocery stores and whose diets have become more unhealthy and monotonous. Cali kallio, research manager at the Natural Resources Centre of the Finnish Ministry of Agriculture, assesses that rising prices will lead to unhealthy diets because often cheaper foods contain more fats, sugars and additives.

Lotta, a highly educated single mom who works in the ict industry, began applying for low-income grants in the second half of last year. She told reporters that it now takes a long time to buy food every time she goes to the supermarket, because her 3-year-old daughter is allergic, and it is not easy to pick foods in the supermarket that are both acceptable and cheap or discounted. In the early 1990s, when Finland's economy was in recession, she recalled her childhood, and she shed tears, a time of deprivation, gloom and pain. Lotta said she didn't know what the world would look like now, and what kind of childhood memories pressures such as financial worries and rising prices would leave for her daughter.

According to a survey by K Group, a large Finnish supermarket chain, more and more Finns are no longer buying fresh food every day, but buying what they need for multiple days at a time. Jenna, who works as a health care worker, not only goes to the supermarket twice a week to make big purchases and concentrates on making a lot of food to save money, but also tries to let her two children eat in kindergarten.

June 25 is Midsummer Day in Finland. For arctic circumference countries with nearly half a year of cold winter nights, Midsummer means that the best and shortest time of the year has finally arrived. Unfortunately, this year's holiday was hit hard by the Russian-Ukrainian conflict and inflation. For many Finns, high oil prices and travel costs limit the range of travel, holiday cabins become more remote, summer cuisine becomes an aftertaste, and everything is changed. Even more worrying is that inflation is often just the beginning of a "big game."

(Guangming Daily Helsinki, July 6)

Guangming Daily ( 2022-07-07 12 edition)

Source: Guangming Network - Guangming Daily