Finland’s Economy Continually Struggles to Keep Up with Competitors

Finland’s Economy Continually Struggles to Keep Up with Competitors

Jari Hännikäinen, a senior market economist at OP Group, has stated that due to Finland’s weak demographic development, strong economic growth should not be anticipated in the future. In recent years, Finland’s economic development has lagged behind that of its competitor countries. The Finnish national economy fell into recession in the latter half of last year, according to Statistics Finland.

Data released on Thursday revealed that Finland’s gross domestic product (GDP) dropped by 0.7% in the final quarter of last year, compared to the previous quarter. When adjusted for working days, it was 1.8% lower than the same period the previous year. Finland’s GDP shrank by 1.0% in 2023 compared to 2022.

Hännikäinen highlighted that since 2007, Finland’s GDP has grown by only 6%, while Sweden’s GDP has grown by over 30%. He described the situation as unfortunate. The euro crisis, from which Finland suffered heavily and has been slow to recover, is a significant reason for Finland’s economic backwardness compared to competitor countries, according to Hännikäinen.

Furthermore, Finland’s demographic and productivity development is less favorable than that of its competitors. Finland’s demographic development is particularly weak, and the working-age population is decreasing, causing the country to lag behind others. In contrast, in countries like Sweden and Norway, the working-age population is growing strongly, providing these economies with a higher growth potential.

Finland’s productivity development has also fallen behind, particularly in the service sector, where productivity has been weak in the long term. In comparison, the service sector in Sweden has been able to better utilize technology to increase productivity.

According to a forecast by the OP Group, Finland’s GDP is not expected to grow this year. Despite the bleak outlook, Hännikäinen believes that economic conditions will improve towards the end of the year. He suggests that for growth to occur, there needs to be a positive change in the industry and clear indications from the European Central Bank about upcoming interest rate cuts.

However, Hännikäinen maintains that due to the country’s population development, Finland’s economic growth will likely remain modest in the long term. As such, he advises against banking on strong economic growth in the coming decades.