Image: Ismo Pekkarinen / AOP

Finland’s economy will grow at a slower rate than previously forecast this year, banking group Danske Bank said on Friday. Compared to a previous forecast of annual growth of two percent, the bank now estimates that Finnish GDP (gross domestic product) will increase by 1.7 percent this year.

Next year, growth is expected to slow further to 1.5 percent. Finland’s economic growth will be the weakest of the five Nordic countries, Danske said, as a period of economic recovery, low inflation and interest rates will come to an end.

At the same time, Finland and the other Nordics, whose economies rely on exports, will suffer from a downturn in the global economy and investments.

"Even this forecast may turn out to be too optimistic," Danske Bank chief economist Pasi Kuoppamäki told Yle, as the bank’s forecast is based on data gathered just before and after the New Year.

"Data released after the report was written shows that the slowdown in global economic growth may be even quicker than previously expected."

Signs of trouble

The most serious problem for Finland is the ongoing slowing in eurozone economic expansion to about 0.2 percent last autumn, the bank said. Europe is faring worse than China and the US because of many factors working in unison, Kuoppamäki said.

"Germany is the engine of Europe’s economy, but its car industry has problems. In addition, there are European countries that never got swept into the global economic growth of the past few years. Italy is one example," he said.

Industrial production figures released by the US on Thursday show that manufacturing orders there have fallen to a two-year low.

"We remain optimistic about the US but new figures could give rise to weaker expectations," Kuoppamäki added.

"While the trade war between the US and China has not yet made a dent in the global economy's major indicators, there are likely other companies besides Apple where investors’ profit expectations have been too high," the economist noted. "Apple’s profit warning on Wednesday is an example of how a slowdown in China and its trade war with the US will impact on companies’ results."

Nevertheless, Danske is not predicting a recession in Finland. The economy will still grow, albeit at a lower rate, which in turn could have a negative effect on employment, for example.

Compared to its Nordic neighbours, Finland also benefits from lower consumer debt and the absence of housing bubbles, the bank said.