Finnish Economy Falls Back Into Recession, Early Indicator Shows

Finland entered its third recession in six years, preliminary data showed, as government efforts to halt debt growth collided with the longest industrial slump in 20 years.

Gross domestic product contracted 0.8 percent in the fourth quarter from the prior period, Helsinki-based Statistics Finland said on its website, citing preliminary data based on a monthly trend indicator. The economy shrank 1.5 percent from a year earlier, the agency said.

The economy “fell back into a slight recession,” Juhana Brotherus, an economist at Danske Bank A/S, said in a note. “Finland’s economy hasn’t seen real growth since summer 2011.”

The euro area’s top-rated economy hasn’t grown for the past two years as Prime Minister Jyrki Katainen pushes through 5.5 billion euros ($7.5 billion) in austerity measures to protect the AAA rating. Nobel economics laureate Paul Krugman said last month Finland is in a “depressed” state, faulting government policies for undermining demand.

Finland’s two export cornerstones are in decline after Nokia Oyj lost its battle to dominate the smartphone market and as the nation’s forest industry succumbs to demand for online news.

Finland’s plight is continuing even as growth in Germany and France, Europe’s two largest economies, beat economists’ estimates in the fourth quarter in a sign the fragile euro-area recovery is gaining traction.

Too Quick?

“One shouldn’t be too quick to pronounce a new recession has started” even if the drop is as big as 0.8 percent, Pasi Sorjonen, economist at Nordea Bank AB in Helsinki, wrote in a note before the data. “It’s better to wait until early March for the first reliable estimate on the economy when actual preliminary data on quarterly accounts are published.”

An export-led recovery may be around the corner and the outlook for this year is “carefully positive,” Brotherus said, citing a pick-up in the global economy, a recovery in the euro-area and Finnish businesses saying the worst is over.

The GDP trend indicator may be subject to “significant” revisions, especially at turning points of economic trends, the statistics office said. It will publish the fourth-quarter GDP estimate on March 3.

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